Campbell soup shares are in the red in after-hours activity Thursday, after the US food company announced plans to sell-off its international and fresh foods business arms. The move follows a complete review of its activities, in the wake of poor Q2 earning and the departure of its previous CEO.
Campbell Soup shares ended the US trading session 0.40% higher at $39.99. However, in out-of-hours activity – after the food group reported its Q3 earnings and shared its company sale plans – the stock slumped over 4%.
Campbell Soup sale plans
Campbell Soup said it is seeking to focus on its core activities, Campbell Snacks and Campbell Meals and Beverage, in its North American market, while selling its other interests. Specifically, it plans to sell two international businesses, Arnott’s and the Kelsen Group and its fresh foods business.
“Campbell’s Board of Directors considered a full slate of strategic options, including optimizing the portfolio, divesting businesses, splitting the company, and pursuing a sale,” said Campbell’s interim President and CEO Keith McLoughlin.
“The Board concluded that, at this time, the best path forward to drive shareholder value is to focus the company on two core businesses in the North American market with a proven consumer packaged goods business model,” McLoughlin added.
Sale plans to reduce revenue by around 25%
The proposed plans to focus the business on its proven market is expected to reduce the firm’s annual revenues by around 25%. The move is also expected to allow the food and beverage firm to increase its cost savings by $150 million, to a total of $945 million, by 2022.
“Our plan will build upon our existing strengths. Our new leadership team will concentrate on significantly improving operational discipline through a rigorous management model that aligns the enterprise from strategy through execution,” McLoughlin said.
“We are moving forward with a sense of urgency to complete these changes in fiscal 2019, setting the foundation for sustainable, profitable growth in fiscal 2020 and beyond,” he added.
Despite the sale plan, activist investor Daniel Loeb from Third Point LLC and George Strawbridge Jr. who is a descendant of the original Campbell’s condensed soup inventor, both strongly favour a full sale of the business. Together they own around an 8.4% share of the Campbell Soup business.