Campbell Soup announced on Thursday that it will sell its fresh foods business as well as two of its international units that include Kelsen and Arnott’s brands, as the company which next year will be 150 years old, struggles to gain financial footing.
The company added that it was raising its cost savings goal to $945 million by 2022.
Campbell shares fell more than 4.3% in early Thursday trading before the opening bell on Wall Street.
This news arrives as part of a critical and thorough review Campbell had of its complete operations and holdings, following its disclosure of earnings it called unacceptable and the departure of Denise Morrison its CEO.
Interim CEO at Campbell Keith McLoughlin through a prepared statement said Thursday that the board, as part of its review, considered a complete slate of different strategic options that included the optimization of its portfolio, splitting up the company, divesting businesses and looking for a sale. The CEO added that the board came to the conclusion the best path for Campbell forward is to put focus on two core businesses in its North America market.
McLoughlin added that Campbell remained open as well as committed to evaluating every strategic option that would enhance value over the long term.
The sale of the fresh food unit of Campbell, which includes Bolthouse Farms, as well as its international businesses, will help to reduce debt that was left from its acquisition for $6.1 billion of Snyder’s Lance the pretzel maker that took place earlier in 2018.
The acquisition by the soup business of Snyder’s increased the debt burden at Campbell by over three-fold to $9.5 billion as of the end of the quarter just ended, from $3.1 billion last year.
Moody’s Investors Service, the ratings company, cited the high leverage ratio of Campbell’s as being a problem and questioned the ability the company had in paying down the debut when placing its bonds under reviews for a the possibility of a downgrade last May.
Snyder’s, which is the maker of Hanover pretzels, is also the maker of Kettle and Cape Cod potato chips, amongst other popular types of snack food.
Selling the fresh foods businesses including Bolthouse Farms would bring about an undoing of strategy that former chief executive Denise Morrison heralded to invest cash flow from the profitable soup business into foods that were trendier.
However, the company stumbled due to little experience in managing fresh food, which was exacerbated by the drought that hit California.