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Campbell to Spin Off Weaker Units

September 10, 1997|From Bloomberg News

Campbell Soup Co. said Tuesday that it will spin off a company made up of seven slow-growing businesses, including Swanson frozen foods and Vlasic pickles, to focus on soups, cookies and other more profitable foods.

The world's largest soup company had said in July it might sell or spin off the units, which have annual sales of $1.4 billion, or about 18% of Campbell's fiscal 1997 revenue. A sale of the units, which had only slight gains in revenue and earnings last year, would have resulted in a huge tax burden.

The spinoff would let Camden, N.J.-based Campbell focus on its namesake soups, Prego spaghetti sauce, Pepperidge Farm cookies and food service lines, which had 1997 sales growth of 10% and earnings growth of 15%. Building up its main businesses while shedding lesser units is the heart of Campbell's year-old plan to become a dominant consumer goods company with reliable earnings.

"Whenever a company spins off the crummy parts, it's always good for what's left," said Jason Wallach, a portfolio manager at Meyer Handelman Co., which holds 303,200 shares of Campbell. "What they're spinning off didn't have the value or the growth rate of the other divisions."

The as-yet-unnamed company would be headed by Campbell executive Robert Bernstock.

Although the move had been expected on Wall Street, the announcement helped ignite a rally in shares of Campbell, whose brand image is so well-known it was used by artist Andy Warhol in the pop art revolution of the 1960s.

Campbell Soup's shares rose $1.31 to close at $51.69 on the New York Stock Exchange. Shares earlier in the day touched an all-time high of $52.88.

In the 1990s, the company has sold more than two dozen businesses with sales of $800 million, which contributed 1% of its earnings.

The spinoff awaits approval by Campbell's board and an Internal Revenue Service ruling that would grant tax-free status.

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