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Campbell to Buy Bolthouse for $1.55 Billion to Add Juices

Campbell Agrees to Buy Bolthouse for $1.55 Billion to Add Juices
Buying Bolthouse will strengthen Campbell Soup Co.'s U.S. beverage division, which makes the V8 brand of juice and accounted for about 10 percent of sales in the year ended July 31. Photographer: Ken James/Bloomberg

Campbell Soup Co., world’s largest soupmaker, agreed to buy Bolthouse Farms for about $1.55 billion in cash to bolster its juice business.

Bolthouse had sales of $689 million and earnings before interest and taxes of $79 million in its fiscal year ended March 31, Camden, New Jersey-based Campbell said today in a statement. Bakersfield, California-based Bolthouse is being bought from private-equity fund Madison Dearborn Partners LLC. The purchase price includes no debt.

Buying Bolthouse will strengthen Campbell’s U.S. beverage division, which makes the V8 brand of juice and accounted for about 10 percent of sales in the year ended July 31. That unit was Campbell’s fastest-growing last quarter, generating $208 million in revenue, while sales in its soup unit have slowed.

“While it’s encouraging that they’re growing out their faster-growing healthy beverage business, the addition of Bolthouse doesn’t address the challenges that Campbell’s still faces in its domestic soup business,” Erin Lash, a Chicago-based analyst with Morningstar Inc., said today in an interview.

Campbell fell 0.8 percent to $32.72 at the close in New York. The shares have fallen 1.6 percent this year.

Campbell’s U.S. beverage business boosted sales 2 percent to $593 million through the nine months ended April 29. Sales in its U.S. Simple Meals business, which includes soup, have declined 2 percent to about $2.3 billion in the same nine months.

Soups Focus

The company won’t lose focus on the North American soups business, Chief Executive Officer Denise Morrison said today in a conference call. The Bolthouse purchase also won’t get in the way of opportunities to expand outside North America, Morrison said.

“This is an area in which have done extensive work in the past year and we are continuing our vigorous pursuit of attractive acquisitions and partnerships in international,” she said.

Previous management at Campbell had considered bids for Bolthouse and passed, a person familiar with the matter said last week. Morrison, who took over last year, was more interested than predecessor Doug Conant, said the person.

Private-equity firms such as Ares Management LLC and Advent International Corp. also explored bids for Bolthouse, a person familiar with the matter said last week.

Deal Valuation

At $1.55 billion, Campbell’s purchase of Bolthouse would be about 19.6 times Bolthouse’s $79 million of Ebit in the 12 months through March 31 and about 16.8 times its $92 million of adjusted Ebit, which excludes costs to close some plants. In a survey of almost 150 similar deals in the past decade, the median price buyers paid was 13.5 times earnings before interest and taxes, according to data compiled by Bloomberg.

“It does look like it’s slightly rich,” Lash said.

The deal is valued at about 9.5 times Bolthouse’s fiscal 2012 adjusted earnings before interest, taxes, depreciation and amortization, which takes into account the present value of estimated tax benefits, Chief Financial Officer Craig Owens said on the call.

Bolthouse’s roots date back almost a century, when the family of the same name began commercial vegetable farming in Michigan, according to the company’s website. Bolthouse, which employs about 2,100 people, now sells fresh carrots, beverages and salad dressings as well as private-label products.

Madison Dearborn, founded 20 years ago in Chicago, acquired Bolthouse in 2005, according to data compiled by Bloomberg. The buyout firm’s other investments have included pay-as-you-go wireless carrier MetroPCS Communications Inc. and LA Fitness International LLC, a North American chain of gyms.

Morgan Stanley was financial adviser to Campbell, and Davis Polk & Wardwell served as legal counsel. Bolthouse Farms was advised by Credit Suisse Group AG and Goldman Sachs Group Inc. with Kirkland & Ellis LLP acting as legal counsel.

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