What happened
Campbell Soup (CPB -1.15%) is dipping into the pantry for growth, agreeing to a deal for $2.7 billion in cash and assumed debt to acquire Sovos Brands (SOVO). The deal offers a substantial premium to Sovos shareholders, and the stock is up 25% on Monday morning as a result.
So what
Sovos is a relatively young company, formed in 2017 and public since 2021. The company is the maker of pasta sauces, dry pasta, soups, frozen entrées, frozen pizza, and yogurts, all sold in North America under the brand names Rao's, Michael Angelo's, and noosa.
On Monday, Campbell agreed to acquire Sovos for $23 per share in cash, a premium of 28% to Sovos' Friday close. Campbell is paying a healthy 14.6 times adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for Soros, looking to diversify and grow its meals and beverages division.
"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," Campbell' CEO Mark Clouse said in a press release. "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."
Now what
As Clouse notes, Sovos has been a fast grower in the food industry. The company had net sales of $837 million in 2022, generating compound annual growth of 28% from 2019 to last year.
The stock was up about 30% from its initial public offering price, beating the market. It is clear what attracted Campbell to make the deal, but for investors, one promising growth story in the food business is soon to be off the market.
