--Food shares climb after $23 billion Heinz takeover bid
--Heinz CEO has advocated industry consolidation
--Other food companies may need to consider similar route
-analyst
(Updates throughout with latest stock movement, analyst
comments.)
By Mia Lamar
Food stocks notched multiyear highs Thursday as the takeover of
H.J. Heinz Co. (HNZ) raised hopes for more consolidation in the
grocery aisle.
Campbell Soup Co. (CPB) earlier climbed as much as 6% and was
recently up 1.9% to $38.92 ahead of its fiscal second-quarter
report due Friday. General Mills Inc. (GIS) rose 3% to $44.28,
while Kellogg Co. (K) and ConAgra Foods Inc. (CAG) also traded
higher. Thursday's gains came as the broader Standard & Poor's
500 stock index was little-changed, recently down less than a point
near 1520.
H.J. Heinz agreed to be acquired by Warren Buffett's Berkshire
Hathaway Inc. (BRKA, BRKB) and 3G Capital for $23 billion. Heinz
shares surged 20% to $72.49, a penny below the offer price.
The deal--the largest-ever takeover of a pure-food producer,
according to Dealogic--could signal a new round of
merger-and-acquisition activity for the packaged-food industry,
analysts said.
Heinz Chief Executive William Johnson "has always been an
advocate for industry consolidation and this could prove to be a
signal to investors that other companies may need to consider
consolidation as well," Deutsche Bank said in a note to
clients.
The firm noted absolute valuations for packaged-food companies
over the past 18 months have been at the low to middle end of
historical ranges as many grapple with weak volume and intense
pressure from rising commodity costs.
Campbell Soup, for instance, is struggling to compete in the
grocery aisle as demand for its namesake soups steadily drifts
lower. A $1.6 billion acquisition last year of fresh-foods maker
Bolthouse Farms marked a departure for the self-acknowledged "very
conservative" company, though analysts say it still has much to
achieve in its turnaround efforts.
Still, a broader-market rally and some signs of improving
consumer demand have been pushing food shares higher. Thursday's
gains led to all-time highs for General Mills and Kellogg shares,
while Campbell shares set a new 4 1/2-year high.
The 144-year-old soup company's market capitalization stands at
$12.3 billion, about half of Heinz's market value. Kellogg and
General Mills, by comparison, are much larger, valued Thursday at
$21.6 billion and $28.5 billion, respectively.
Write to Mia Lamar at mia.lamar@dowjones.com
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