Campbell Soup Co. said March 12 it closed its acquisition of Sovos Brands Inc. The Camden-based buyer added the maker of Rao’s pasta sauce and other products in an all-cash deal valued at $23 per share or $2.7 billion.

Sovos will fold into a new unit within Campbell’s Meals & Beverages division. The Distinctive Brands business unit will include the newly acquired products as well as Pacific Foods, an organic soup and broth maker that Campbell bought for $700 million in 2017. In addition to Rao’s sauces, soups and pastas, Sovos’ products include Michael Angelo’s frozen entrées and frozen pizza along with noosa yogurt.

According to the buyer, Sovos reported $1 billion in net sales for the year ended Dec. 30, 2023, with an organic net sales increase of 25% year over year. Rao’s organic net sales increased 37%, generating $775 million in annual revenue.

Campbell said Senior Vice President and General Manager Risa Cretella will lead the Distinctive Brands unit. Previously, Cretella served as chief sales officer at Sovos.

“This important milestone in Campbell’s history adds several market-leading and scaled premium brands to our company,” Campbell’s President and CEO Mark Clouse said in a statement. “It accelerates Campbell’s successful strategy and provides a substantial runway for sustained profitable growth. An enhanced Meals & Beverages division paired with our differentiated Snacks division creates an advantaged portfolio that makes Campbell one of the most dependable and growth-oriented large capitalization value names in food.”

Maintaining growth

When Campbell announced the deal last August, the company said it expected to close by December 2023. But the Federal Trade Commission issued a second request for information about the transaction under the Hart-Scott-Rodino Antitrust Improvement Act. That move delayed completion by several months.

Nonetheless, Mick Beekhuizen, Campbell’s executive vice president and president, Meals & Beverages, told NJBIZ that the company “always believed in the transaction” and that he is “super excited with where we are right now.”

Beekhuizen characterized the newly acquired brands as complementary to Campbell’s existing portfolio. Now, he said his focus is on integration and continuing Sovos’ strong growth trajectory. “We’ve obviously seen a lot of growth in the premium segment, and Sovos Brands are really well-positioned within that. … The growth has been phenomenal and making sure that we maintain that growth is absolutely critical.”

Critical to accomplishing that goal, he added, is to “maintain the mindset and the culture that the people have created within Sovos that has enabled that growth and focus on innovation.”

And he reiterated that Campbell “has been very clear that we are not touching the sauce,” for which Rao’s is known.

Finding opportunity

Food producers like Campbell have been working for years to stay abreast of changing consumer tastes and habits, which shifted heavily toward cooking at home when many dining out options were foreclosed. “And that plays right into what we’re talking about today,” Beekhuizen said. “We continue to see a lot of interest in cooking at home and making sure that we provide products that help the consumer put a delicious meal on the plate at home — that has been a core focus in the past and it is definitely a trend that has been amplified during COVID and is continuing.”

Logistically, Beekhuizen said he expects Campbell will be able to take advantage of the “distribution opportunities” that such a large company can offer. Campbell said its supply chain expertise and scale should help drive synergies. The company expects annual cost savings of about $50 million over the next two years.

In a regulatory filing, the buyer said its lenders provided an unsecured delayed draw term loan facility in an aggregate principal amount of up to $2 billion, with a maturity date of Oct. 8, 2024. As of March 11, Campbell said it had approximately $925 million of borrowings outstanding under its commercial paper program.