Agencies Say Campbell Deal May Lead To Downgrade

Campbell Soup Co. may face some credit rating downgrades as a result of its plans to acquire natural-food maker Bolthouse Farms.

(AP) — Campbell Soup Co. may face some credit rating downgrades as a result of its plans to acquire natural-food maker Bolthouse Farms.

The Camden, N.J.-based company announced Monday that it will buy Bakersfield, Calif.-based Bolthouse for $1.55 billion from private equity firm Madison Dearborn Partners LLC. Campbell is hoping the deal will expand its business beyond soup and processed foods into juice, carrots and other healthier fare that has grown popular with consumers.

Standard & Poor's Ratings Services placed Campbell's investment-grade A- long-term corporate credit rating and all of its long-term issue-level debt ratings on watch for possible downgrade. Its A-2 short-term and commercial paper ratings remain unchanged and are not on watch.

Meanwhile, S&P placed Bolthouse Farms, which has a B corporate credit rating, on watch with the possibility of affirming or raising its current junk-grade rating.

The rating agency said that the deal would increase the soup company's debt and weaken its credit protection measures. Bolthouse's credit profile, on the other hand, would be improved by the acquisition by the larger and financially stronger company.

S&P estimates Campbell's had about $3.4 billion of fully adjusted debt outstanding as of April 29. Bolthouse has an estimated $675 million fully adjusted debt outstanding.

Moody's Investors Service put Campbell's investment-grade A2 long-term senior unsecured rating and the Prime-1 short-term rating under review for downgrade . The rating agency said that it believes if a downgrade were to occur, it would be limited to one notch. That would keep the company in investment-grade territory.

The rating agency said the acquisition of a smaller company such as Bolthouse, which has revenue of less than $700 million, would not be transformational for Campbell.

Campbell has been struggling with its core soup business as consumers have shifted purchases away from shelf stable to fresh foods and have turned to other choices for value-oriented meals. And Moody's said it needs to have a better understanding of how this deal will support Campbell's existing business and be a part of its longer-term strategic plan.

Campbell's shares fell 27 cents to close at $32.72 Monday, in line with broader market trends. Its shares rose 6 cents in after-hours trading.