Campbell Soup (CPB) to Acquire Sovos Brands (SOVO) for $23 Per Share, $2.7 Billion
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Campbell Soup Company (NYSE: CPB) and Sovos Brands, Inc. (Nasdaq: SOVO) today announced that the companies have entered into an agreement for Campbell to acquire Sovos Brands, Inc. for $23 per share in cash, representing a total enterprise value of approximately $2.7 billion. This represents a 14.6x adjusted EBITDA multiple1 including expected annual run rate synergies of approximately $50 million. The strategic transaction adds a high-growth, market-leading premium portfolio of brands to diversify and enhance Campbell’s Meals & Beverages division, providing a substantial runway for sustained profitable growth.
Sovos Brands had annual adjusted net sales of $8372 million in calendar year 2022 and is a compelling growth story as a North America focused food company with compounded annual organic net sales growth rate of 28%3 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%4 of Sovos Brands adjusted net sales in fiscal 2022, grew organic net sales by 34.9%5 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 Campbell’s President and CEO Mark Clouse. “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.”
“Today marks a momentous occasion for Sovos Brands as we announce our plans to join the Campbell’s family,” commented Todd Lachman, Founder, President and Chief Executive Officer of 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. 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.”
Compelling Strategic Rationale
- Multi-dimensional Value Creation
- Acquisition unlocks significant value through strong and sustainable growth opportunities
- Expect a fast, effective and efficient integration and synergy unlock given familiarity with categories and Campbell’s strong capabilities, processes and proven integration playbook
- 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, growing items per store and household penetration to category peer levels
- Campbell’s expertise in retail execution is expected to enhance shelf productivity, geographic footprint, and sub-category penetration
- Sovos Brands’ expertise in innovation, category expansion and the marketing of high-growth brands is expected to enhance and strengthen Campbell’s capabilities as the portfolio continues to transform
- Accelerates Campbell’s Focused, Strategic Plan
- Further advances the company’s focused one geography, two division roadmap – Meals & Beverages and Snacks
- Solidifies role of Meals & Beverages as a sustainable and dependable contributor to the enterprise, by complementing a stable, core portfolio in mainstream product categories with a fast-growing differentiated, premium segment
- 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 fast growing, on-trend, premium frozen meals segment with Rao’s and Michael Angelo’s, while adding meaningful scale to the existing Pepperidge Farm’s frozen portfolio
The all-cash offer for Sovos Brands of $23 per share for a total enterprise value of approximately $2.7 billion represents an adjusted EBITDA multiple of 14.6x including run rate synergies and 19.8x excluding synergies6. 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. The transaction is expected to be accretive to adjusted diluted earnings per share by the second year, excluding one-time integration expenses and costs to achieve synergies.
Following the completion of the transaction, Sovos Brands’ results will be managed within Campbell’s Meals & Beverage division.
Transaction Structure and Timing
Campbell plans to finance the acquisition price through the issuance of new debt. Projected leverage is expected to be approximately 4x7 at closing. Given Campbell’s expectation of continued strong cash flow from operations, the company remains committed to maintaining its capital allocation priorities that include continued investment in key growth and productivity initiatives in the business, maintaining a competitive dividend, a focus on reaching our target leverage ratio of approximately 3x by the end of the third year, and continuing anti-dilutive share repurchases.
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 2023. The transaction has been approved by both Boards of Directors. In addition, each member of the Board of Directors of Sovos Brands that is a stockholder of Sovos Brands and certain funds affiliated with Advent International that are stockholders of Sovos Brands have entered into voting agreements with Campbell, pursuant to which each has agreed, among other things, to support the transaction.
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.
Transaction Conference Call and Webcast
Campbell’s management team will host a conference call to discuss the acquisition announcement today at 8:00 a.m. EST. Participants calling from the U.S. may dial in using the toll-free phone number (888) 210-3346. Participants calling from outside the U.S. may dial in using phone number (646) 960-0253. The conference access code is 2518868. Additionally, access to a live listen-only audio webcast is available at the following link: https://events.q4inc.com/attendee/701780401. The accompanying slide presentation, as well as a replay of the webcast, will be available at investor.campbellsoupcompany.com/events-and-presentations.
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