Campbell Soup Company to acquire Sovos Brands in $2.7bn deal

Campbell Soup Company (NYSE: CPB) has agreed to acquire Sovos Brands, Inc. (Nasdaq: SOVO) for $23 per share in cash, marking a total enterprise valuation of approximately $2.7 billion. The agreement, implying a 14.6x adjusted EBITDA multiple, forecasts $50 million in annual synergies and introduces a dynamic, premium brand lineup to amplify Campbell Soup‘s Meals & Beverages segment, paving the way for long-term growth.

Sovos Brands: A North America Food Powerhouse

Racking up annual adjusted net sales of $837 million in 2022, Sovos Brands spotlighted a remarkable growth trajectory. With a 28% compounded annual organic net sales growth rate between fiscal 2019 and 2022, its portfolio comprises premium goods like pasta sauces, frozen meals, and yogurts under revered brand names, notably Rao’s, Michael Angelo’s, and noosa. Particularly, Rao’s emerged as the frontrunner, accounting for 69% of Sovos Brands’ sales in fiscal 2022, registering a 34.9% growth year-on-year.

Leaders Speak on the Landmark Deal

Campbell Soup’s President and CEO Mark Clouse remarked, “This acquisition aligns seamlessly with our strategic focus. Our past achievements affirm our readiness for this acquisition. Sovos Brands amplifies our Meals & Beverages segment, in tandem with our Snacks division, making Campbell a leading name in food growth.”

Sovos Brands’ CEO, Todd Lachman, said, “Joining the Campbell’s family marks a significant chapter for Sovos Brands. Our exponential growth, anchored by Rao’s, owes immensely to our talented team. This transaction, resulting in a 92% surge from our 2021 IPO price, affirms Campbell’s capacity to elevate our growth.”

Multi-dimensional Value Creation

Campbell Soup expects robust growth prospects with streamlined integration and synergy. Anticipating extensive earnings growth for the division, Campbell Soup’s expertise promises enhanced operating synergies for Sovos Brands.

Campbell Soup’s $2.7 billion acquisition: Sovos Brands to joins the meals and beverages division. Photo courtesy of Timviola/Wikimedia Commons.

Attractive Growth Pathways

Rao’s and Michael Angelo’s present significant opportunities, with Campbell Soup’s proficiency in retail set to amplify product reach.

Reinforcing Campbell Soup’s Vision

This acquisition accentuates Campbell’s strategic plan, solidifying the role of Meals & Beverages alongside their Snacks division. The inclusion of Sovos Brands introduces Campbell to the high-demand Italian sauce and premium frozen meals sectors.

Financial Outlook

The all-cash offer presents a 14.6x adjusted EBITDA multiple. The acquisition foresees a boost in adjusted diluted earnings per share by the second year, excluding certain expenses.

Completion of this transaction awaits Sovos Brands stockholder approval and customary regulatory green lights, with the expectation to conclude by December 2023. Both company Boards have given their nod, with Sovos Brands’ Board members and specific affiliated funds cementing their support through voting agreements.