Campbell Soup to Acquire Sovos Brands

Campbell Soup Co. has entered into an agreement to acquire Sovos Brands Inc. for $23 per share in an all-cash transaction, representing a total enterprise value of approximately $2.7 billion. According to Campbell, the strategic transaction adds a high-growth, market-leading premium portfolio of brands to diversify and enhance its Meals & Beverages division.

Sovos Brands had annual adjusted net sales of $837 million in calendar year 2022. The food company has a compounded annual organic net sales growth rate of 28% from fiscal 2019 to fiscal 2022, offering a variety of premium products, including pasta sauces, dry pasta, soups, frozen entrées, frozen pizza and yogurts under the brand names Rao’s, Michael Angelo’s and noosa. The flagship Rao’s brand, which represented approximately 69% of Sovos Brands adjusted net sales in fiscal 2022, grew organic net sales by 34.9% compared with the prior year.

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The acquisition aims to accelerate sustainable, profitable growth for the newly incorporated brands through increased distribution, leveraging Campbell’s expertise in retail execution and Sovos Brands’ expertise in innovation, category expansion and high-growth brand marketing.

"Today marks a momentous occasion for Sovos Brands as we announce our plans to join the Campbell’s family," noted Todd Lachman, founder, president and CEO of Louisville, Colo.-based Sovos Brands Inc. "We have built a one-of-a-kind high- growth food company focused on taste-led products across a portfolio of premium brands, anchored by the Rao’s brand. Our success would not have been possible without the incredibly talented and passionate team at Sovos Brands, which has been instrumental in building one of the fastest-growing food companies of scale in the industry today."

Lachman added, "This transaction is expected to create substantial value for our shareholders, resulting in a 92% increase from our 2021 IPO price. As one of the most trusted and respected food companies in North America, I’m confident in Campbell’s ability to continue bringing our products to more households and further building on our track record of growth and success for years to come."

The acquisition also has many benefits for Campbell. For example, acquiring Sovos will help the company:

• Complement its Meals & Beverages core portfolio with a differentiated, fast-growing premium segment.

• Deliver the strategic objective of building a $1 billion sauce business by entering the premium ultra-distinctive pasta sauce market.

• Extend its presence in the fast-growing, on-trend, premium frozen meal segment, while adding meaningful scale to the existing Pepperidge Farm frozen portfolio.

"We’re thrilled to add the most compelling growth story in the food industry and welcome the talented employees who have built a nearly $1 billion portfolio," said Mark Clouse, CEO and president of Camden, N.J.-based Campbell. "This acquisition fits perfectly with and accelerates our strategy of focusing on one geography, two divisions and select key categories that we know well. Our focused strategy has enabled us to deliver strong results over the last five years, enhance our brands and capabilities, and generate strong cash flow to lower debt. With all this progress, I am confident in our readiness to execute and integrate this important acquisition."

The acquisition is anticipated to deliver annualized cost synergies reaching approximately $50 million over the next two years and is expected to be accretive to adjusted earnings per share by year two, excluding one-time integration expenses and costs to achieve synergies. The deal is expected to close by the end of December 2023.

Campbell generated fiscal 2022 net sales of $8.6 billion. Its portfolio includes iconic brands such as Campbell’s, Cape Cod, Goldfish, Kettle Brand, Lance, Late July, Milano, Pace, Pacific Foods, Pepperidge Farm, Prego, Snyder’s of Hanover, Swanson and V8.