New Jersey-based Campbell Soup Co. has announced its intention to acquire Colorado-based Sovos Brands Inc. for $23 per share in cash, representing a total enterprise value of about $2.7 billion.
Sovos Brands offers a variety of 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 percent of Sovos Brands’ adjusted net sales in fiscal 2022, grew organic net sales by 34.9 percent compared to the prior year.
“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, president and CEO.
“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 Sovos Brands portfolio strengthens and diversifies our Meals & Beverages division and, paired with our faster-growing and differentiated Snacks division, makes Campbell one of the most dependable, growth-oriented names in food.”
Todd Lachman, founder, president and CEO, said, “Today marks a momentous occasion for Sovos Brands as we announce our plans to join the Campbell’s family. 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. This transaction is expected to create substantial value for our shareholders, resulting in a 92 percent 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.”
Strategic rationale
- Multi-dimensional value creation
- The acquisition is expected to provide considerable earnings growth contribution to the division while unlocking additional value through meaningful cost synergies.
- Campbell’s supply chain excellence and scale are expected to drive operating synergies for Sovos Brands, while improving scale efficiency of Campbell’s core operations.
- Attractive sustainable profitable growth
- Significant whitespace opportunity for Rao’s and Michael Angelo’s through increased distribution.
- Campbell’s expertise in retail execution is expected to enhance shelf productivity, geographic footprint and sub-category penetration.
- Accelerates Campbell’s strategic plan
- Delivers Campbell’s $1 billion sauces strategic objective by filling in critical white space in the growing, ultra-distinctive Italian sauce category, a segment where Campbell’s does not currently compete.
- Extends Campbell’s presence into the frozen meals segment with Rao’s and Michael Angelo’s, while adding scale to the Pepperidge Farm’s frozen portfolio.
Financial highlights
The acquisition is expected to support Campbell’s long-term financial growth algorithm with expected annualized cost synergies reaching approximately $50 million over the next two years, applying the learnings from the successful integrations of Snyder’s-Lance and Pacific Foods.
Following the completion of the transaction, Sovos Brands’ results will be managed within Campbell’s Meals & Beverage division.
Transaction structure and timing
Campbell’s plans to finance the acquisition price through the issuance of new debt.
The closing of the transaction is subject to Sovos Brands stockholder approval and customary closing conditions, including regulatory approvals. Closing is expected by the end of December. The transaction has been approved by both boards of directors.
Evercore acted as Campbell’s lead financial advisor in this transaction. Davis Polk & Wardwell LLP acted as Campbell’s legal counsel. Goldman Sachs & Co. LLC and Centerview Partners LLC acted as financial advisors to Sovos Brands, and Hogan Lovells US LLP and Richards, Layton & Finger, P.A. acted as legal counsel. Weil, Gotshal & Manges LLP acted as Advent International’s legal counsel.
