M&A Deal # 3 — Cambell Soup
Of all the major publicly traded processed and packaged goods companies, Campbell Soup (CPB) is one of the worst performers over the past year, down 11%. And that’s after Gene Marcial’s July 16 column in Forbes speculating that the maker of soup and juices and other food products was a potential takeover target for Warren Buffett.
The truth is, CPB stock has been fundamentally broken for several years.
Over the past decade, on only four occasions has it managed to beat its peers — averaging 7.5% on an annualized basis, more than four percentage points worse than its peers and 73 basis points less than the S&P 500. Given these results, it’s not surprising that writers as experienced as Marcial are raising questions about it remaining independent.
Would Buffett really make another food move so soon after buying Heinz in partnership with 3G Capital?
I don’t think so.
The partnership used a lot of debt to finance the Heinz deal, and Buffett will want that trimmed before wading back into the food pool. Any deal to acquire CPB stock would cost the buyer at least $20 billion including assumed debt. While CPB does have some strong brands (Campbell Soup, V8, Bolthouse), none are more iconic than Heinz which he already owns. I’d say he passes.
However, that doesn’t mean somebody else won’t come along and make an offer to the Dorrance family, who own 42% of CPB stock. If I had to wager, I’d look for a large food company in South America looking to grow in the U.S. market. Two possibilities include Femsa (FMX) which owns the largest chain of convenience stores in Mexico along with 20% of Heineken (HEINY) and 48% of Coca-Cola Femsa (KOF) and JBS S.A. (JBSAF), whose majority owned Pilgrim’s Pride (PPC) tried to buy Hillshire Brands (HSH) but was unsuccessful.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.