In its largest acquisition in company history, Campbell Soup Co. announced on Monday it agreed to buy snack maker Snyder’s-Lance for $4.87 billion. Brands under the Snyder’s-Lance umbrella include Cape Cod and Kettle potato chips. The acquisition for Campbell is a bid to find revenue growth that has been elusive for years for the soup maker.
The deal, which is the sixth for Campbell’s in the past five years, is a sharp contrast to the majority of its other acquisitions.
The others moved Campbell into the fresher-food field that is seen by leadership in the company as more in line with consumers today, though frequently management had pointed to snack as an expansion target.
The CEO and president of Campbell Denise Morrison said that adding Snyder’s-Lance to the company would dramatically shift its portfolio toward the quicker-growing snack category.
Snacks will represent close to half of the annual revenue at Campbell, while soup will drop to just over 25%.
Morrison called the acquisition of the snack maker a remarkable transformation for Campbell and she was confident it would lead to a better growth profile.
By adding Snyder’s-Lance, annual revenues at Campbell will surpass $10 billion, a goal Morrison set for five years back in 2014.
A spokesperson for Campbell said that Snyder’s-Lance has had annual growth in revenue of 4% excluding any acquisitions, which is better than that of Campbell overall.
One industry analyst on Wall Street said 4% was not bad; adding that today for food, flat was up. Another analyst said that risks are involved with the deal as Campbell will go deep into debt so it can pay for the acquisition.
Campbell will pay $50 a share to acquire Snyder’s-Lance which represents a premium of 27% over the closing price of Snyder’s-Lance the final day prior to first reports surfacing that Campbell was attempting to buy the snack company.
Shares of Campbell were up slightly at the close Monday, while shares of Snyder’s-Lance increased 6.95%.
This deal will require approval from the Snyder’s-Lance shareholders. Campbell expects to close the deal during the spring of 2018.
The full price, including debt assumption is approximately $6.1 billion.
Standard & Poor’s downgraded the credit rating of Campbell, which reflects inherent risks of integration for such a large acquisition and a risk that the Fresh segment at Campbell’s will continue underperforming and the weak margins at Snyder’s-Lance might not rebound.