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Behind the Campbell/Snyder’s-Lance deal, including Baptista's Bakery's role

Monday, January 22, 2018   (0 Comments)
Charlotte Business Journal

John Downey


Baptista's Bakery in Franklin may have played a key role in introducing Snyder's-Lance Inc. to its eventual buyout partner, Campbell Soup Co., which initiated at least one other company to contemplate a bid for Snyder's-Lance.

Snyder’s-Lance Inc. invited bids from four other potential buyers after Campbell Soup first expressed an interest in purchasing the Charlotte, N.C.-based snack maker. One of the four said it was willing to bid as much as $52 a share and remained in negotiations until the very end. But the rival bidder, in the end, could not resolve a potential antitrust issue in time to meet a bid deadline set by the Snyder’s-Lance (NYSE: LNCE) board.

Camden, N.J.-based Campbell (NYSE: CPB) agreed to pay $50 a share for the company in a deal announced Dec. 18 and valued at $4.9 billion.

Details of the negotiations and the attempt to shop the company to other bidders are contained in a preliminary proxy filed by Snyder’s-Lance in advance of an upcoming shareholder meeting where it must win 75 percent of the shares voted to approve the deal. The date for the meeting has not yet been announced. But as the companies hope to complete the transaction by early in the second quarter, it will have to be soon.

The filing notes that before Campbell Soup first approached Snyder's-Lance, the two companies had a link — through Baptista's Bakery. Baptista's had been engaged by Campbell "(o)ver the past several years" to produce cracker chips for the New Jersey food company. Baptista's was acquired by Snyder's-Lance in 2014.

What's more, Campbell's interest in Snyder's-Lance was sparked in part by Lance's growing presence in healthier snacks, the very product lines that Baptista's produces and a big reason why Lance purchased the Franklin company.

Overall, the negotiations took five months from the first approach — a call Campbell CEO Denise Morrison made July 15 to Snyder’s-Lance CEO Brian Driscoll "to request a meeting to discuss a potential strategic transaction.” The back and forth included what looks like a last-minute attempt by Campbell to lowball Snyder’s-Lance in the deal. 

Termination fee

As is usual in deals of this sort, the Snyder’s-Lance board reserves the right to consider "a competing superior proposal from any bidder” if one is offered. But if the Charlotte company backs out of the deal, it must pay Campbell a $149 million termination fee.

The board considers the fee "reasonable in the context of comparable transactions and the likelihood that a fee of such size would not be a meaningful deterrent to alternative acquisition proposals,” the proxy filed recently with the Securities and Exchange Commission says.

Alphabet soup

The four companies that Snyder’s-Lance approached are not named. The proxy refers to them as companies A, B, C and D. It describes them as companies identified by strategic adviser Goldman Sachs (NYSE: GS) as those with a possible interest that could bid at least $50 per share.

The filing offers the following narrative of the five-month negotiation:

Through the spring and summer, Snyder’s-Lance was assessing its strategic prospects. Morrison called Driscoll on July 15. They met Aug. 23 in Charlotte and Morrison "expressed Campbell’s desire to explore the possible acquisition” of Snyder’s-Lance, although no price was discussed. The Snyder’s-Lance board agreed to pursue negotiations and Campbell started limited due diligence work.

On Oct. 3, Campbell proposed pursuing an all-cash transaction of $46 to $50 per share, a premium of 26 to 37 percent over Snyder’s-Lance's stock price over the previous 30 days. But Campbell wanted exclusive negotiations for 45 days.

$50 minimum

The Snyder's-Lance board decided to pursue negotiations, but it would not agree to exclusivity until definitive transaction documents were signed. And it wanted a minimum offer of $50. Campbell said it would work toward $50 a share but could not guarantee that price.

By Oct. 21, the board authorized Goldman Sachs to contact the four companies it had identified as potential buyers and ask about interest in a deal at a minimum of $50 per share in cash. All were contacted by Oct. 27. By Oct. 31, Company A had signed confidentiality agreements and was allowed the same due diligence access given to Campbell. Company B was considering an offer. The two others were not interested.

The board elected to appoint a special negotiating committee made up of non-management members who had no potential conflicts of interest in considering purchase proposals.

The pace of negotiations quickened from there. Company A advised Synder’s-Lance it might pay as much as $52.

Low offer

By Nov. 17, the special committee set a bidding deadline for Dec. 4. Company B pulled out. Campbell asked for an extension. Driscoll and Morrison, with other senior management, met Nov. 20 in New York City for a detailed session on due diligence. The next day, Snyder’s extended the bid deadline to Dec. 12.

At the deadline, Campbell formally proposed to buy the company for just $48 per share. Company A called Goldman Sachs to say it "would not be submitting a bid by the required time because its legal counsel had identified an antitrust issue that it needed more time to evaluate.”

Goldman Sachs told Company A no bid would be accepted any later than Dec. 13 and told Campbell Soup its offer was "insufficient and would not be entertained by the special committee or the board.”

Efforts to resolve Company A’s concerns were unsuccessful, and it did not make an offer. Campbell revised its offer Dec. 13 to $50.

Final wrinkle

On Dec. 15, the Snyder’s-Lance board met in Charlotte. The committee recommended going with the Campbell offer. The board resolved to proceed.

But there was a final wrinkle on Dec. 16, when a "smaller food company” contacted Driscoll about a possible business combination. But the committee  "determined that it was not likely that Company E could propose a ... transaction that would be equal or better" to the Campbell deal and told Driscoll not to respond.

On Dec. 17, after the final merger details were worked out, the special committee met by telephone and decided to recommend the sale. The board met by telephone that same day and the board decided to recommend the sale to shareholders. 

"In the early morning of December 18, 2017, Campbell and the company executed and delivered the merger agreement,” the filing says. "Campbell and the company issued a joint press release announcing the transaction.”

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