Kraft Heinz Has Appetite For Campbell's, But JPMorgan Isn't Biting

Kraft Heinz Co KHC has a soup craving.

According to the New York Post, the company is interested in acquiring Campbell Soup Company CPB, which announced a strategic review last month.

Why It’s Important

The alleged attraction follows a nearly 20-percent Street retreat on Kraft Heinz. But by JPMorgan’s assessment, a deal may not provide the desired relief.

“We would be surprised if KHC wanted CPB, a company that does not solve KHC’s growth problem and is facing numerous internal challenges,” analysts wrote Monday. “So we do not expect a deal to take place. But in the end, money talks.”

In the best case, according to JPMorgan estimates, a Campbell takeover could drive at least 20-percent earnings-per-share accretion for Kraft Heinz, serve as a “stepping stone” for a bigger merger, and bolster the food portfolio with a strong label.

However, Campbell’s purchase of Snyder’s-Lance lends high execution risk, the target has high exposure to decreasingly lucrative direct-store delivery, and it doesn't fit Kraft Heinz interest in growth assets prone to international expansion.

What’s Next

Campbell intends to report its review findings in late August, at which point Kraft Heinz expects the commencement of a sales process, according to the New York Post. The report also said General Mills, Inc. GIS is seen "as a possible Campbell buyer."

At time of publication, Campbell shares were trading up about 5 percent at $40.50. Kraft Heinz was up nearly 1 percent.

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