Campbell Soup Co. plans to acquire Sovos Brands Inc., a Colorado-based consumer packaged food company whose portfolio includes Rao’s pasta sauce, Michael Angelo’s frozen entrees and Noosa yogurt.

Under the terms of the $2.7 billion all-cash offer announced Aug. 7, the Camden-headquartered corporation plans to add Sovos to its meals and beverage division after the deal’s expected close by the end of December.

The purchase will be financed through new debt, with a projected leverage of 4.7x, and is expected to produce annualized cost synergies reaching $50 million within two years, according to Campbell.

Founded in 2017, Sovos sells a range of premium products across North America, including pasta sauces, dry pasta, soups, frozen meals and yogurts.

With an annual adjusted net sales of $837 million in 2022, the company’s flagship, Rao’s, accounted for 69% of earnings and grew organic net sales by 34.9% during the period, according to the company.

Campbell believes bringing Rao’s into its sauce lineup – which now consists of lower-priced Prego sauces and Swanson broths – will enable the company to deliver on its strategic goal of building a $1 billion sauce business by entering the “ultra-distinctive pasta sauce” space.

In a statement, Campbell CEO and President Mark Clouse said, “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.”

He added, “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.”

Todd Lachman, founder, president and chief executive officer of Sovos, said joining Campbell “marks a momentous occasion” for his business.

“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,” said Lachman. “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.”

According to Lachman, the transaction is expected to create “substantial value” for Sovos’ shareholders, resulting in a 92% increase from its 2021 initial public offering price of $280 million. 

The deal with Sovos comes three months after Campbell announced plans to sell off its Emerald Nuts snack brand for an undisclosed sum. The business – which is known for its grab-and-go 100 calorie packs and assorted glazed nut products – was added to Campbell’s family as part of a $6.1 billion acquisition of Snyder’s-Lance in 2018.

Campbell’s snacks division includes Snyder’s pretzels, Lance cracker sandwiches, Pepperidge Farm products, Late July snacks, Cape Cod potato chips, Kettle chips and Snack Factory pretzel crisps.

Its meals/beverages division brand portfolio includes its namesake soup, as well as Prego pasta sauces, V-8 juices, Swanson broth, Pacific organic soups and Pace salsa.