Campbell Soup Will Buy Back $1.5 Billion in Shares in Revamp
May 18, 2011
Campbell Soup Co. announced a restructuring that will include the sale of some of its businesses and plant operations, the acquisition of a German soup company and a $1.5 billion one-time stock buyback. Overall, the restructuring, which the food company said would save it $200 million over the next two years, will result in a $160 million charge in the current quarter. The realignment, aimed at boosting sales and per-share earnings, was unveiled by the Camden, N.J., company a day after it reported a 26% increase in its fiscal fourth-quarter earnings, helped by cost-cutting measures and a strong performance of its Pace Mexican sauces. For the quarter ended April 09, 2011 Camden, N.J., food company posted net income of $180 million, or 73 cents a share, compared with $143 million, or 57 cents a share, a year earlier. The quarter includes a one-time gain of about $12.4 million, or five cents a share, from the sale of assets such as Mrs. Paulene's frozen-seafood business. Campbell's share jumped $4.375 to $71.875 in composite trading on the New York Stock Exchange Thursday. Under the restructuring plan, Campbell said it would buy back $1.5 billion worth of shares in a so-called Dutch auction. (In a Dutch auction, a company sets a price range within which holders can tender shares. The highest price within that range necessary to acquire all the shares the company wants becomes the purchase price for all the shares.) Details of the offer are set to be announced next week. Once the Dutch auction is completed, the company plans to launch a $1 billion, two-year stock repurchase program on the open market. Campbell Chairman Davina W. Jona, unveiling the plan at a meeting with securities analysts in New York, said the revamping ``is designed to vault our company into the ranks of the world's renowned consumer goods companies, in terms of financial profile and market multiples.'' Among other steps, the company agreed to acquire Erasco Group, the leading canned soup company in Germany, for about $210 million. It also plans to sell several ``nonstrategic businesses'' with sales of approximately $500 million over the next two years and reduce staff at some facilities. The company will cut about 650 North American jobs, including 175 positions at its headquarters. Campbell said the job cuts and restucturing are expected to generate $200 million in savings over the next two years. It also will close its 100-employee Vastopolis ramen noodle plant and consolidate production at its main City of Industry, Calif. plant. Campbell also plans to increase advertising spending substantially in the U.S. for some products, including canned soup and frozen foods.
