Moody’s cuts Campbell Soup to Baa2

Moody's Investors Service said it downgraded the senior unsecured debt rating of Campbell Soup Co. to Baa2 from A3 and revised the outlook to stable.

The action concludes the review for downgrade that began on Dec. 18.

The review followed Campbell's announcement that it entered into a definitive agreement to acquire Snyder's-Lance, Inc. for $50/per share or about $6.1 billion in cash.

Moody's also affirmed Campbell's Prime-2 short-term rating, which was not under review.

The pending transaction has received regulatory approval but remains subject to Snyder's-Lance shareholder approval, which the agency expects that it will receive. Campbell management expects the transaction to close by March 31.

Moody’s said the downgrade primarily reflects the significant increase in financial leverage that will result from the transaction.

“Campbell plans to finance the acquisition with over $6 billion of new senior unsecured debt, comprised of long-term and short-term instruments. Moody's estimates that debt/EBITDA at closing will approximate 5.0x before synergies, compared to 2.2x currently,” the agency said in a news release.

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