Campbell may be next food firm in play

Campbell Soup Co. may be next on acquirers' grocery lists after the $29 billion takeover of H.J. Heinz Co. this year.

Campbell options contracts surged this month amid speculation the $13 billion Camden-based company could attract takeover interest. After 3G Capital and Berkshire Hathaway Inc. agreed in February to buy Heinz, investors are eyeing Campbell as the next big target in the packaged food industry, said Edward Jones & Co.

Investment firm 3G may be interested because of the benefits of combining Heinz's and Campbell's vegetable processing, and Warren Buffett's Berkshire could help bankroll a deal again, Sanford C. Bernstein & Co. said.

Like Heinz, Campbell has a strong brand, which may appeal to other food makers and financial buyers, said S&P Capital IQ. Even as Campbell faces slowing sales of its iconic soups as consumers turn to fresher foods and competing brands such as Progresso, the company still offers a buyer the biggest share of the soup market at 22 percent.

While a takeover would need approval from family members owning more than 40 percent of Campbell's shares, the company also is more affordable than 70 percent of food-manufacturing peers based on its price-earnings ratio, according to data compiled by Bloomberg.

Campbell has "obviously got some brands that are really worthwhile," Jack Russo, a St. Louis-based analyst at Edward Jones, said. After the acquisition of Heinz, "investors tend to think, where there's one, there could be two or three" deals.

Carla Burigatto, a spokeswoman for Campbell, declined to comment on a potential sale of the company. A representative for 3G declined to comment, and Buffett did not respond to a request for comment sent to an assistant.

A month ago, Campbell reported a decline in first-quarter soup sales and said profit for the year ending in July would be less than previously forecast. Amid market-share losses to rivals such as Progresso-maker General Mills Inc., Campbell has been focusing on bolstering its beverage division.

Campbell has made acquisitions since 2011 to catch up with shifting consumer preferences, including the purchases of juice maker Bolthouse Farms and baby food purveyor Plum Organics.

While merging Heinz and Campbell could make sense, 3G may prefer to expand in faster-growing emerging markets, said Thilo Wrede, a New York-based analyst at Jefferies Group L.L.C. 3G, which is based in New York, is backed by Brazilian billionaire Jorge Paulo Lemann.

Any buyer of Campbell also may need to win over the Dorrance family, Wrede said. John T. Dorrance, a Philadelphia chemist, invented condensed soup in 1897, and his descendants now own more than 40 percent of the shares, according to regulatory filings. His granddaughter Mary Alice Dorrance Malone serves on the board and is the largest holder with 17 percent of the shares.

"We haven't seen any indications they would be willing sellers," Wrede said. "That would be the biggest challenge."