Campbell Soup Company and Sovos Brands, Inc. Enter Into a Strategic Agreement
CAMDEN, N.J. & LOUISVILLE, Colo., August 07, 2023 — Campbell Soup Company (NYSE: CPB) and Sovos Brands, Inc. (NASDAQ: SOVO) today announced their plans for a strategic agreement, with Campbell set to acquire Sovos Brands, Inc. for a total enterprise value of approximately $2.7 billion.
Strengthening Campbell’s Portfolio Through Sovos Brands Acquisition
The acquisition of Sovos Brands strengthens and diversifies Campbell’s Meals & Beverages division. Sovos Brands’ portfolio of growth-oriented brands, such as market-leader Rao’s, adds depth and diversity to Campbell’s mainstream portfolio. The acquisition also presents an opportunity for Campbell to expand into adjacent categories.
Overachieving Strategic Goals with the Acquisition of Sovos Brands
With this acquisition, Campbell overdelivers on its strategic goal of building a $1 billion sauces business. The company will now make a significant entrance into the ultra-distinctive pasta sauce market, which has previously been unchartered territory for them.
Transaction Creates Significant Shareholder Value
The acquisition is expected to drive meaningful sales growth, EBIT acceleration, and cost synergies, thereby creating substantial shareholder value. By the second year, the transaction is projected to be accretive to adjusted diluted earnings per share.
Enhancing Campbell’s Strategic Plan
The Sovos Brands acquisition aligns with and advances Campbell’s strategic plan, which is centered around focusing on one geography, two divisions, and key categories. Sovos Brands’ portfolio strengthens and diversifies Campbell’s Meals & Beverages division and, when paired with Campbell’s Snacks division, positions Campbell as one of the most dependable, growth-oriented names in the food industry.
Acquisition of Sovos Brands: A Compelling Growth Story
Sovos Brands had adjusted net sales of $837 million in 2022 and has consistently demonstrated compelling growth as a North American-focused food company. The company has a compounded annual organic net sales growth rate of 28% from fiscal 2019 to fiscal 2022 and offers a variety of premium products including pasta sauces, soups, frozen entrées, pizza, and yogurts under popular brands such as Rao’s, Michael Angelo’s, and noosa.
Sovos Brands Financial Highlights
The all-cash offer for Sovos Brands of $23 per share, for a total enterprise value of approximately $2.7 billion, is based on an adjusted EBITDA multiple of 14.6x, including expected run rate synergies. The acquisition is set to support Campbell’s long-term financial growth, with expected annualized cost synergies reaching approximately $50 million over the next two years.
Transaction Structure and Timing
Campbell plans to finance the acquisition through the issuance of new debt. The transaction is subject to Sovos Brands stockholder approval and customary closing conditions, including regulatory approvals. Closing is expected by the end of December 2023.
Second Quarter Highlights: Sovos Brands
Sovos Brands reported its second quarter 2023 results, showing a 10.2% increase in net sales year-over-year, reaching $217.6 million. The company’s flagship Rao’s brand reported an impressive net sales growth of 29.3% year-over-year, with the sauce dollar consumption growing by 31.5% year-over-year.
This acquisition represents an exciting milestone in Campbell’s journey, contributing to earnings growth, diversifying its portfolio, and bolstering its position in the global food market. The transaction is a testament to Campbell’s ongoing strategic plan, presenting considerable opportunities for future growth.
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