Campbell Soup Company (“Campbell” or “the Company”) has announced an agreement to purchase several market-leading European culinary brand businesses from Unilever for EUR1 billion (US$950 million).

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The acquisition expands and strengthens Campbell’s market presence in European dry soup and bouillon markets. This acquisition makes Campbell the market leader in the U.K., Belgium, France, Germany, Sweden and Finland, with 30% of the European market compared with 20% previously, with all but one of the acquired brands number one or two in their respective markets. The combined brands should add over $400 million sales and $50 million EBIT to Campbell going forward. If included for F2000, these businesses increase Campbell Europe’s sales from $568 million to $982 million pro forma. The acquired businesses have 58% of sales from the instant soup, bouillon, and noodles segment.


Instant soup and bouillon generates 49% of global soup volume and instant dry soup is growing at an average rate of 10% across Europe.


Campbell controls 60% of the global wet soup market but, until now, has had a small presence in the dry soup market.


The acquisition will have a slight negative effect on EBIT and EBITDA margins (pro forma numbers estimate EBITDA margin down to 23.9% from 24.2% and EBIT margin down to 19.7% from 20.2%), but these should rebound as synergies come into effect (Campbell has an established infrastructure in 85% of the acquired business’ markets). The purchase will be slightly dilutive to earnings until 2003.

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Although debt levels will increase significantly in the near term, Campbell has suspended its share repurchase program which should help the balance sheet recover (Campbell has spent over $3.7 billion on repurchases since 1996). Two years of free cash flow used to repay debt should bring debt levels back to those of F2000. Adding the impact of the acquisition to fiscal 2000’s financial statements, cash flow to total debt drops from 0.32X to 0.25X, and EBITDA coverage drops from 7.4X to 6.0X.


DBRS is a Toronto-based, full-service credit rating agency established in 1976. Privately owned and operated without affiliation to any organization, DBRS is respected for its independent, third-party evaluations of corporate and government issues, spanning North America, Europe and Asia. DBRS’ extensive coverage of securitizations and structured finance transactions solidifies our standing as a leading provider of comprehensive, in-depth credit analysis.


Dominion Bond Rating Service Limited web site: http://www.dbrs.com