Report: Ferrero and Mondelez seen as frontrunners to buy Campbell Soup's Arnott's
- Anyone who wants to buy Campbell Soup's Australia-based Arnott's cookie brands — with a field presumably led by Mondelez and Ferrero — has less than three weeks to submit bids, according to the Australian Financial Review.
- Campbell announced it wants marked-up copies of the purchase and sale agreements that were officially sent out this past week from each bidder by March 13. the Australian newspaper said. Binding offers are due on March 20.
- In addition to the two CPG giants, private equity firms KKR and Bain Capital are also said to be taking part in the bidding process.
Campbell has been having a rough time financially and otherwise. Last year, former CEO Denise Morrison abruptly resigned, Daniel Loeb's activist hedge fund Third Point took a $300 million stake in the company and it announced the planned divestment of both its Fresh division and international brands.
Arnott's is being sold along with the Denmark-based Kelsen Group, which makes Royal Dansk cookies. The Australian Financial Review reports Arnott's is the largest biscuits player in Australia. With $737 million in annual sales, it sells more than six times the next biggest competitor, Mondelez.
It's no surprise that Mondelez is taking a good hard look at acquiring these brand, thought to be up for sale for about $3 billion. Last year, Mondelez — the owners of Oreo, Chips Ahoy and Nabisco — spent about $500 million to purchase Tate's Bake Shop, best known for its premium bagged chocolate chip cookies, to dominate U.S. cookie aisles. Arnott’s, best known to Americans as the maker of Tim Tams, could give the snacking giant the same advantage in the Asia-Pacific region.
Ferrero is a more interesting candidate for the acquisition, since the company is currently more heavily invested in sweets than snacks. The parent company of Nutella, Kinder and Tic Tac has recently invested in several U.S.-based candy deals, including the purchase of Ferrera Candy and Nestlé’s U.S. confectionery business.
Still, there have been hints that Ferrero is looking outside of candy for growth. In addition to being a front runner for the bidding war for Arnott’s, Ferrero reportedly placed a preliminary bid of more than $1.5 billion to acquire Kellogg's Keebler, Famous Amos and fruit snacks businesses in January. Perhaps this change in course is an indication that Ferrero is looking to tap into the growing and lucrative snack market. If that’s the plan, Kellogg’s brands would be an ideal method to increase a foothold in the American snacking sector, while Arnott’s would be a way for the company to expand its global footprint.
The private equity interest in the Australian brand leaves more unknown. A private equity acquisition would mean an infusion of cash and likely a board of advising experts at the helm, but the company would otherwise operate more or less independently. This may result in Arnott's floundering without the experience and guidance of a larger CPG company. Conversely, it could allow the cookie brand to become less encumbered by bureaucratic necessities and be more nimble to respond to consumer demands, which could help grow the brand.
At the same time, as evidenced by Campbell’s latest earnings report, Arnott’s as a brand is growing. 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.
Despite this growth, this divestment is intended to tighten Campbell’s portfolio and give the company a clearer direction as it works to get its core divisions back on track. The company hopes these divestments and other actions it is taking bring $945 million in cost savings by fiscal year 2022. However, Third Point, which pushed for a full company sale last year, will want to see dramatic changes much sooner.
Campbell Soup is moving quickly, announcing the sale of refrigerated soup brand Garden Fresh Gourmet and a refrigerated soup factory for its Fresh division just last week. By fast-tracking these divestitures, Campbell seems to be making up for lost time as it reorients itself to focus on areas with more significant expertise.
- Australian Financial Review Campbell Soup cracks whip in Arnott's auction