UPDATE: Aug. 2, 2019: Campbell Soup officially announced the sale of Arnott’s and other parts of Campbell’s International operations to KKR for $2.2 billion. The agreement also includes a licensing arrangement for the exclusive rights to use certain Campbell brands, including Campbell's, Swanson, V8, Prego, Chunky and Campbell's Real Stock, in Australia, New Zealand, Malaysia and other select markets in Asia, Europe, the Middle East and Africa.
- Private equity firm KKR is buying Campbell Soup’s Australian snack division, which includes Arnott’s cookies, for $2.2 billion, according to Reuters.
- The sales price was reportedly less than the more than $3 billion the company was asking for.
- This sale marks the latest divestiture in Campbell’s restructuring effort to improve its profitability, which included putting its International and Fresh units up for sale last August.
KKR has been waiting patiently in the background as other firms like Oreo cookie maker Mondelez put bids on Campbell’s Kelsen Group and Australian snack division. But after Mondelez pulled out of talks last June, things got shaken up and Campbell split the sale of its international divisions in two. When it did so, Campbell Soup quickly sold its Danish baked snacks manufacturer Kelsen Group for $300 million to CTH Invest, a Belgian holding company affiliated with Ferrero.
Although KKR is a private equity firm, it is not a stranger to the food space. In the last several years, the company has made several investments in Asian and American food conglomerates ranging from pork production in China to New York-based Nature’s Bounty. In one of the largest European acquisitions by private equity, the firm purchased Unilever’s margarine and spreads business for $8.03 billion in 2017. Likely bolstered by the success of owning another solid food business with strong cash flow — Unilever's spreads had an estimated 20% profit margin — Arnott’s as a stand-alone sale was a tasty temptation for KKR.
Sales in Campbell’s global biscuits and snacks division grew from $708 million in the first quarter of 2018 to $1.24 billion in the first quarter of 2019. Arnott’s also happens to be the largest biscuits player in Australia, according to The Australian Financial Review. With $737 million in annual sales, it sells more than six times as much as its top competitor, Mondelez.
While the private equity firm is gaining the benefit of another established brand with strong cash flow, Campbell is wrapping up the divestitures it planned last summer. In addition to selling off its international brands, the company is selling its Garden Fresh Gourmet brand to an affiliate of Fountain of Health USA, a maker of hummus, dips, prepared salads, pates and frozen desserts. The company also is selling its Bolthouse Farms business to an affiliate of Butterfly Equity for $510 million — a steep drop from the $1.55 billion Campbell paid for the brand in 2012. Campbell has also recently shed some of its other business units, including a Fresh Division refrigerated soup factory.
The sales are happening soon after a shakeup of executive personnel. Campbell Soup's ultimate goal is producing $945 million in cost savings by fiscal year 2022. This restructuring is intended to help pay down the company's debt, which in 2018 had ticked up to nearly $9.9 billion — up from $3.5 billion a year prior.
But is this enough? Some analysts think it won't satisfy activist investor Daniel Loeb, whose Third Point fund has a more than $300 million stake in Campbell Soup and has pushed for a full-company sale.
The company is also looking for improvement internally while it’s shedding some of its businesses. At its investor day in June, the soup company laid out the roadmap for reheating a soup segment that has gotten cold. In order to refocus the company on growth in the sector that made it famous, Campbell is planning to increase soup research and development by 50% as well as pivot its focus to more on-trend items like bone broth and on-the-go, plant-based recipes. Perhaps with this dual focus, things will finally start looking up for the soup company.