Campbell Soup shares soar 9% on Kraft takeover talk, but analysts don’t think it’ll happen

Campbell Soup Co. shares jumped 9% in Monday trading after reports that Kraft Heinz Co. is interested in a takeover, but analysts don’t think a deal will take place.

The New York Post reported on Friday that Kraft Heinz is “very much interested in buying Campbell,” and believes the sales process is imminent.

Kraft Heinz had no comment when MarketWatch reached out.

Campbell Soup  shares are now on pace for the largest percentage increase since May 24, 2000, when the stock rose 11.2%.

Campbell Soup announced last month that its chief executive, Denise Morrison, is retiring and the company would conduct a strategic review of its entire portfolio.

“Everything is on the table. There are no sacred cows,” said interim CEO Keith McLoughlin on the last earnings call, according to a FactSet transcript.

J.P. Morgan analysts have doubts that a sale will occur.

“We would be surprised if Kraft Heinz wanted Campbell Soup, a company that does not solve Kraft Heinz’s growth problems and is facing numerous internal challenges,” analysts led by Ken Goldman wrote. “So we do not expect a deal to take place. But in the end, money talks.”

Campbell Soup sales have declined for the last three years. Kraft Heinz sales fell from $26.49 billion in 2016 to $26.23 billion in 2017 and are expected to decline to $26.21 billion in 2018, according to FactSet consensus.

Among the risks J.P. Morgan outlines, analysts say a Campbell Soup acquisition doesn’t fit Kraft Heinz’s strategy, including a “desire to buy healthy top-line growth” and Campbell Soup would add a “major execution risk” because the company is in transition, including integrating acquisitions of its own.

However, the deal would likely be “highly accretive” to Kraft Heinz’s earnings per share, and could serve to lift Kraft Heinz’s shares and provide what analysts call “ammunition” for a bigger transaction down the road.

“It feels awkward to refer to Campbell Soup, an $11.6 billion company founded four years after the Civil War, as a potential stepping stone for anything,” but J.P. Morgan says it very well could be.

J.P. Morgan rates Kraft Heinz share overweight with a $67 price target.

“[W]e continue to believe Kraft Heinz will favor large-scale, global companies for its acquisition pursuits with brands that can travel around the world, with growing categories, and with significant synergies,” wrote Stifel analysts led by Christopher Growe. “While Campbell Soup no doubt brings significant synergies to Kraft Heinz, we do not believe it has the international presence and growing categories necessary to justify an acquisition by the company.”

Stifel rates Kraft Heinz shares at buy with an $85 price target.

As for Campbell Soup, Stifel thinks the company won’t pursue a sale, but rather divest on a “small scale.”

Campbell Soup shares are down 21.3% for the past year while Kraft Heinz shares are down nearly 29% for the period. The S&P 500 index   has rallied 11% for the last 12 months.