Campbell Soup's Risky Bet on Salty Snacks
On Monday, Campbell Soup Company (NYSE: CPB) announced that it's acquiring Charlotte-based Snyder's-Lance Inc. (NASDAQ: LNCE) for $50 a share in cash, or roughly $4.6 billion. Campbell obtains a snacking specialist in the deal: Snyder's-Lance holds the No. 1 market share position in pretzels (Snyder's of Hanover), sandwich crackers (Lance), and kettle chips (Kettle Brand and Cape Cod). According to the companies' joint press release, the $2.2 billion in trailing-12-month sales for Snyder's-Lance plus Campbell Soup's $2.5 billion in fiscal 2017 sales for its snack division equals about 46% of Campbell Soup's total revenue on a pro forma basis. By comparison, Campbell's soup-based sales fall to 27% of total revenue on a pro forma basis.
The broad idea behind this deal isn't hard to grasp. Campbell wants to reduce its reliance on traditional canned soups, a category which is increasingly back-of-mind as grocery customers favor fresh foods and in-home preparation. Moreover, millennials' love of salty snacks makes Snyder's-Lance an attractive takeover target. Campbell points to the compounded annual growth rate (CAGR) in revenue for Snyder's-Lance of 11.5% between 2012 and 2016 as one of its most attractive aspects. Over the same period, Snyder's-Lance averaged organic net growth (that is, core growth after revenue from acquisitions and currency effects are removed) of 4% -- pretty fast expansion for a consumer packaged goods (CPG) company.
Image source: Snyder's-Lance Inc.
Source: Fool.com