Lawsuit puts Pacific Foods deal at risk for Campbell Soup

28 Sep 2017 --- Campbell Soup Company entered into an agreement on July 6, 2017, to acquire Pacific Foods of Oregon (Pacific Foods) for US$700 million. The completion of the transaction is subject to customary closing conditions. On Aug. 21, 2017, the estate of a former Pacific Foods shareholder, Edward C. Lynch, filed a lawsuit against Pacific Foods, certain of its directors and others seeking more than US$250 million in damages. 

The closing of the transaction was subject to regulatory approvals and customary closing conditions and Campbell expects the acquisition to be neutral to earnings in the first 12 months following closing, excluding certain purchase accounting adjustments, and transaction and integration costs.

Campbell planned to fund the acquisition of Pacific Foods through a combination of short and long-term debt, and the acquisition is not subject to any financing condition. 

While Campbell is not named in the suit, the lawsuit creates an impediment to closing. Yesterday, Campbell notified Pacific Foods that the company has 60 days under the terms of the agreement to resolve the issues arising from the suit if the transaction is to be completed. After the 60-day period, Campbell has the option to extend the cure period or terminate the agreement. 

Mark Alexander, Campbell’s President, Americas Simple Meals and Beverages, says, “We remain enthusiastic about acquiring Pacific Foods, which has a track record of growth and strong health and well-being credentials. However, we will not complete the transaction unless the issues arising from this litigation are resolved to our satisfaction.” 

This information was included in Campbell’s Form 10-K filed with the US Securities and Exchange Commission. 

Once again demonstrating its focus on diversification, the acquisition is the latest in a long line of Campbell deals over the last five years focused on reshaping the company’s portfolio for continued growth. Like many other food and ingredients companies, Campbell is making a point of diversifying its portfolio in response to increased consumer interest in health, well-being and nutrition. 

Back in 2012 Campbell acquired Bolthouse Farms, followed by organic baby-food company Plum and biscuit company Kelsen in 2013 and fresh salsa and hummus maker Garden Fresh Gourmet in 2015.