CAMNDE, NJ – On Monday, New Jersey packaged food maker Campbell Soup announced its acquisition of Sovos Brands for $2.33 billion in cash. Sovos Brands is the owner of Michael Angelo’s and Rao’s, well-known for its premium Italian sauces. Campbell will pay $23 per share for Sovos, representing a nearly 28% premium to the stock’s last closing price.
The food and beverage industry has seen a surge in deal-making in recent quarters, and Campbell’s move to acquire Sovos Brands further strengthens its meals and beverages business. Sovos’ shares were trading at $22.48 while Campbell’s shares slipped 1.2% to $44.58 in early trade following the announcement.
Campbell’s meals and beverages division, which includes ready-to-serve soups, tomato juice, gravies, and dinner sauces sold in the U.S. and Canada, was its top revenue generator in 2022, according to its annual report. The acquisition of Sovos is seen as a strategic move to bolster Campbell’s product portfolio with fast-growing brands.
The packaged food industry has benefited from consumers’ preference for essentials amid cautious spending and limited visits to restaurants. Additionally, companies have raised product prices multiple times to protect their margins from higher input costs.
Sovos Brands reported a 16.3% increase in organic net sales for the second quarter, driven by higher volumes despite higher pricing. The deal, including debt, is valued at $2.7 billion, and Campbell plans to finance the purchase through new debt.
The transaction is expected to be finalized by the end of December and is projected to contribute to adjusted earnings per share by the second year after the deal closes.