Campbell Soup Company, the maker of iconic canned soups and snacks, announced on Monday that it will acquire Sovos Brands Inc., the parent company of Rao’s pasta sauces, noosa yogurt and Michael Angelo’s frozen meals, for $2.7 billion.
The deal, which is expected to close by the end of December, will add a high-growth, premium portfolio to Campbell’s meals and beverages division, which includes brands such as Prego, Swanson and V8. Campbell’s CEO Mark Clouse said the acquisition fits with the company’s strategy of focusing on key categories and expanding its snacks division, which includes brands such as Pepperidge Farm, Goldfish and Kettle.
“This is a juggernaut. This is a business that has been growing at double digits for a long time. It’s got incredible runway in front of it,” Clouse said in an interview with CNBC on Tuesday.
Sovos Brands, which is backed by private equity firm Advent International, has annual net sales of about $650 million and is expected to grow by double digits in fiscal 2024, according to Campbell. The company’s flagship brand, Rao’s, is known for its authentic Italian sauces made with simple ingredients and sold in distinctive glass jars. Rao’s also offers soups, frozen entrees, pasta and dry mixes.
“We are thrilled to join the Campbell family and are confident this transaction will accelerate our growth strategy as we continue to bring delicious food to more people in more places,” Sovos Brands’ CEO Todd Lachman said in a statement.
Campbell said the deal will be accretive to its earnings per share in fiscal 2023 and will generate annual cost synergies of about $50 million by fiscal 2026. The company also said it expects to maintain its investment grade credit rating and continue to pay its current quarterly dividend.
“The addition of Sovos Brands also creates a significant opportunity to increase our presence in faster-growing distribution channels including club and e-commerce,” Clouse said.
Bill Johnson, chairman of Sovos Brands and operating partner at Advent International, said the transaction will create value for shareholders and customers.
“We believe Campbell’s iconic brands, resources and capabilities will complement Sovos’ strengths and allow us to realize our full potential,” Johnson said.
Clouse said the acquisition is part of Campbell’s transformation plan that began in 2018, when the company faced pressure from activist investors to sell off its non-core businesses and focus on its core categories. Since then, Campbell has divested its international operations, its fresh food unit and its Arnott’s biscuits business.
“This is a very exciting day for Campbell and our future,” Clouse said.
Relevant articles:
– Campbell will acquire Rao’s premium sauces parent company for $2.7 billion, ABC News, August 7, 2023
– Campbell Soup Acquires Rao’s Pasta Sauce Parent Company for $2.7 Billion, Bloomberg, August 7, 2023
– Campbell Soup to acquire Rao’s parent Sovos Brands $2.7 billion deal, MarketWatch, August 7, 2023
– Campbell Soup CEO talks merger with Rao’s sauce maker: ‘This is a juggernaut’, CNBC, August 9, 2023