Campbell Soup uses $3 billion divestiture funds to cut debt, leverage

By Devika Patel

Knoxville, Tenn., Aug. 30 – Campbell Soup Co. plans to reduce debt “significantly” and make a “meaningful” reduction in its leverage through the divestiture of its Campbell International business, which is expected to bring in about $3 billion and close in the first half of fiscal 2020.

The company’s leverage ratio won’t reach management’s target of 3x debt to EBITDA through these divestitures, but executives said that the number should be “meaningfully” below 4x by the end of 2020.

“We are well on our way to completing the divestitures of the non-core businesses we identified last year, shedding the underperforming fresh businesses that added complexity to the portfolio and working toward closing on the two transactions related to Campbell International, both of which are expected to close in the first half of fiscal 2020,” president and chief executive officer Mark A. Clouse said on the company’s fourth quarter and year ended July 28 earnings conference call on Friday.

“This will do two critical things: It will improve our balance sheet and better focus the business.

“In total, we expect net proceeds of approximately $3 billion from these transactions, which will be used to significantly reduce our debt,” Clouse said.

The company is aiming to get its leverage ratio down to 3x eventually, and these divestitures are expected to bring the ratio “meaningfully” below 4x by the end of 2020.

“Our target [leverage ratio] remains 3x debt to EBITDA, but we won’t quite get there with the current proceeds [from the divestitures],” senior vice president and chief financial officer Anthony P. DiSilvestro said on the call.

“We need a little more time with the base business generating positive cash flow, but we will make a meaningful reduction when we get the proceeds in.

“In terms of the leverage ratio, I think we’ll be meaningfully below 4x debt to EBITDA by the end of 2020,” DiSilvestro said.

Cash and cash equivalents were $179 million as of July 28, 2019, compared to $226 million as of July 29, 2018.

Long-term debt was $7,103,000,000 as of July 28, 2019, compared to $7,991,000,000 as of July 29, 2018.

Campbell Soup is a convenience foods company based in Camden, N.J.

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