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By Mike Caggeso
On Aug. 9, the world's largest soup maker said it was contemplating the fate of Godiva, which makes up about 7% (or $7.3 billion) of the company's revenue. The company's portfolio also boasts Pace, Prego, Swanson, StockPot, V8 and Pepperidge Farm; and each of them are either No. 1 or No. 2 in its industry category, the company says.
The unidentified sources told Bloomberg that Swiss chocolate-maker Lindt & Spruengli AG may be a potential bidder, but Campbell spokesman Anthony Sanzio wouldn't comment on the possible sale.
But reasons for the potential spin-ff are sprinkled among the comments that the company has made throughout the past year.
Earlier this month, the company reported that profits from continuing operations fell by 26% in the fourth quarter that ended July 29.
In July, Campbell's announced it is expanding its global focus to include Russia and China.
In June, the company reported a deal with Coca-Cola Enterprises Inc. (CCE) to distribute Campbell's beverage portfolio, which represents about 10% of Campbell's North American sales.
In May, the company said it was planning to expand its lower sodium platform of soups to microwavable bowls. Three months earlier, the company launched 14 lower sodium soups.
And also in February, the company said it would plunk down $72 million to expand its headquarters in Camden, N.J.
But while its operations span into Europe, China, Japan and Australia, international sales are a paltry $1.5 billion – only a quarter of its U.S. sales of $6 billion. Clearly, if the company is to remain a household name – and to remain independent in this era of rampant consolidation – it needs to ramp up its overseas sales, and in a big way. And by selling Godiva, Campbell's can raise a nice fat bankroll to finance its foreign foray.
That will allow it to develop new products, and to finance new advertising and marketing programs overseas – in existing markets in Europe and Asia, and new ones such as India.
Tying Off Loose Ends
Campbell's pending sell of Godiva is just the latest example of companies refocusing, often by divesting supplementary operations.
Last Thursday, De Beers Consolidated Mines Ltd., the world's largest diamond-mining company, announced it would sell operations at its South Africa Kimberly mine to London-based Petra Diamonds Ltd. for $11 million. The next day,.
Retailer Target Corp. (TGT) announced Wednesday it is putting out feelers for its credit-card unit, a $7 billion portfolio that some analysts say could sell well above that price. The company was mute on what it would do with revenue from the sell off, yet the press release that announced the potential sale also stated the company is retooling its stock repurchase plan.
Interestingly, however, some analysts also say that Target may be starting to feel the effects of the global deterioration in credit quality. The credit card business has been a hugely lucrative one for Target. But now the retailer may actually be seeing deterioration in credit quality within its credit-card portfolio, something that could actually weaken the credit-card unit's sales price.
Similarly, Macy's Inc. (M) sold its credit-card receivables to Citigroup in stages from 2005 to 2006 for $4.6 billion. And on Friday, news surfaced that Macy's might put its entire company up for sale.
Also last week, Alcoa Inc. (AA) sold its nearly 7% stake in red-hot Aluminum Corporation of China Ltd., also known as Chalco (ACH), to 20 to 25 institutional buyers in Europe and Hong Kong. Alcoa, the largest U.S.-based aluminum producer, had been an investor in Chalco since the Chinese company's initial public offering (IPO) in 2001. Its initial investment was less than $200 million, and its sale netted them $1.8 billion.
News and Related Story Links:
- Bloomberg News:
Campbell Is Seeking $1 Billion for Godiva, People Say.
- Business Week:
Target's Credit-Card Sale: Bad Timing?