Snyder's-Lance exploring potential sale?

by Eric Schroeder
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Snyder's-Lance, Pepperidge
A merger of Snyder's-Lance and Campbell Soup would bring together snack brands such as Snyder's of Hanover and Pepperidge Farm.
 

CHARLOTTE, N.C. — Media reports that Snyder’s-Lance, Inc. has engaged an investment bank to explore a potential sale sent shares of the Charlotte-based snack maker soaring on Dec. 14. After closing at $39.41 on Dec. 13, Snyder’s-Lance’s stock climbed more than 15% to as high as $45.50 on Dec. 14. Momentum continued on Dec. 15, with the stock trading as high as $47.56.

Reports of a potential sale have identified the Campbell Soup Co., Camden, N.J., as a possible suitor.

In a Dec. 15 research report, analysts with Vertical Group weighed in on a possible sale.

“Although we’ve been expecting this, we’re surprised in that we didn’t think it would come this soon,” Vertical Group said. “(Lance) is in the midst of both a commercial and operational restructuring, at present. We don’t think management is entrenched, per se, but we could see the company arguing that it is better off on its own, unless certain cash value of $47+ is realized for equity holders. In addition, as we present in this report, we don’t know if (Campbell Soup) is best positioned for the (Lance) asset, after running scenario takeout analysis.”

Vertical Group analysts suggested a potential takeover by Campbell Soup makes some sense, as the company’s chief executive officer, Denise M. Morrison, has been keen to respond to Amazon’s purchase of Whole Foods Market. Campbell Soup earlier this week closed on its purchase of Pacific Foods.

“Certainly, a (Campbell Soup/Lance) combination makes strategic sense, given a potential marriage between Pepperidge and some of (Lance’s) burgeoning brands, along with inherent benefits from combining two attractive D.S.D. assets,” Vertical Group said. “Two immediate questions naturally come to mind: Will (Lance) sell ... and are there any other potential suitors?”

Looking at Snyder’s-Lance’s sales and margin goals, as well as other metrics, Vertical Group opined that the company’s shares may be worth around $47. If the company is able to attract interest above $47 per share, Vertical Group said it expects Snyder’s-Lance to be a seller.

The $47 price tag may price some potential buyers — including Campbell Soup — out of the market, Vertical Group said. Interest is still expected to remain strong for the business, though.

“Our scenario analysis yields the best prospects for (Hershey) or Arca Continental as potential suitors, given attractive accretion profiles and pro-forma leverage sub-4.0x,” Vertical Group said. “Arca, in particular, is interesting. The company recently acquired Deep River Snacks, joining its portfolio that includes Wise, alongside a strategy to become a much bigger player in U.S. salty snacks.”

Snyder’s-Lance was formed in 2010 through the merger of Lance and Snyder’s of Hanover. The company has expanded in recent years through the acquisitions of Snack Factory and Diamond Foods. 
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