雅虎香港財經 Campbell Soup CEO on $2.7 billion pasta sauce deal: We are serious about groceries
Campbell Soup paid $23 per share for Sovos Brands, the maker of Rao's pasta sauce.
Campbell Soup (CPB) CEO Mark Clouse thinks his legacy businesses of chicken noodle soup, Prego pasta sauce, and Swanson broth are tastier growth engines than Wall Street currently believes.
To correct the misperception, Clouse is making a $2.7 billion bet on pricier pasta sauce, dried pasta, and frozen pizza.
The king of chicken noodle soup said on Monday it would pay $2.7 billion — or $23 a share — to acquire Rao's pasta sauce maker Sovos Brands. The purchase price represents a 27% premium to Sovos Brands' closing price on Friday.
Clouse told Yahoo Finance that the purchase sends an "undeniable" signal to Wall Street that Campbell's core grocery business is ripe for growth. He added the deal also signifies the company's transformation — centered on cutting costs, reviving soup brands, and improving snacks businesses such as Goldfish — is just about complete.
The Sovos deal marks Campbell's largest acquisition since former CEO Denise Morrison plunked down $4.87 billion to buy pretzel leader Snyder's-Lance in 2018. It's the first big deal for Clouse as CEO of Campbell Soup.
Rao's parent company, which went public in 2021, will join a Campbell sauce portfolio that consists of the aforementioned lower-priced Prego pasta sauce and Swanson broths. The company posted $878.4 million in net sales last year and $67.8 million in net income.
"We are unsurprised by this morning's announcement as Rao's appears to be a natural fit into CPB's strategy to acquire a premium Italian sauce business," Bank of America analyst Bryan Spillane wrote in a client note.
This year, Wall Street was expecting Sovos Brands to post net sales and net income of $941.4 million and $75 million, respectively.
Campbell's expects the deal to close in December of this year and then be accretive to earnings. The company sees the potential for $50 million in cost savings over the two years after the deal closes.
Clouse also floated the idea of selling Sovos Brands' higher-end yogurt business Noosa, as he views it as "non-core."
Sovos Brands stock rose 25% to $22.56 in trading on Monday. Campbell Soup stock fell 1% to $44.61, as investors likely fretted over the deal being financed with new debt.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
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