Daily Newsletter

24 October 2023

Daily Newsletter

24 October 2023

Campbell Soup’s Sovos Brands acquisition delayed by antitrust review

Campbell Soup now expects the transaction to close in mid-2024 instead of this year.

Simon Harvey October 24 2023

The closing of Campbell Soup Co.’s acquisition of US sauces maker Sovos Brands has been delayed until next year due to an antitrust review.

Campbell Soup announced the $2.7bn deal for the owner of the Rao’s brand of sauces, pasta, soups and frozen meals in August, noting it expected to close the transaction by the end of the year.

However, in a statement yesterday (23 October) Campbell Soup said the US Federal Trade Commission (FTC) has requested “additional information” as part of the competition regulator’s review of the acquisition, its second such request.

“A second request for information is a common feature of the regulatory review for transactions of this type under the Hart-Scott-Rodino Antitrust Improvement Act,” Campbell Soup said.

“The company now expects to complete this transaction in the next calendar year and will continue to engage with the FTC on their review with the objective of closing the transaction in mid-2024.”

Nasdaq-listed Sovos Brands was set up in 2017 by private-equity firm Advent International. It went on to boost its portfolio through M&A, acquiring Michael Angelo’s Gourmet Foods and Rao’s Specialty Foods. In 2018, it also bought the Noosa yogurt business and the pancake and waffle mixes producer Birch Benders.

However, Birch Benders was sold earlier this year to US-based Hometown Food Co. Noosa yogurt might also be up for disposal once the Sovos Brands transaction is completed, Campbell Soup’s president and CEO Mark Clouse suggested on the day of the deal.

“While yogurt is not core to our strategy, we are excited that it’s performing very well with great products and strong profitability. The strength of the Noosa business will allow us to be patient as we evaluate strategic alternatives,” Clouse told analysts in a follow-up presentation.

He added: “Our longer-term view is that yogurt is not a place where we see playing long term. I’m not worried at all about the trajectory of the business. Certainly, we’re not assuming this is going to be the growth engine in the acquisition, but I also don’t see it as a high-risk or heavy liability.”

Last year, Sovos Brands generated net sales of $878.4m, up 22.1% on the previous 12 months, but posted a net loss of $53.5m linked to the Birch Benders disposal. Adjusted net income rose 11.3% to $60.4m.

The Colorado-based business issued second-quarter results on 7 August, the day of Campbell Soup’s acquisition announcement.

Organic sales for the three months to 1 July rose 16.3% (10.2% reported) to $217.6m. Year-to-date group sales were $470.4m.

Second-quarter net income turned to a $5.4m profit from a $30.2m loss, while Sovos Brands posted a profit for the year so far of $13.2m, reversing from a $26.2m loss in the corresponding period.

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