Campbell Soup: Sovos Brings Rich Sales Growth, but Unlikely to Stymie Macro Angst; Shares a Bargain

As concerns surrounding the consumer spending backdrop reverberate throughout the consumer packaged goods industry, wide-moat Campbell Soup opted to buoy its prospects by bringing Sovos Brands (around 10% of total sales, the owner of Italian sauce brand Rao’s Homemade) into the fold. The $2.7 billion price tag ($23 per share, a 28% premium to Aug. 4’s closing price) strikes us as a touch rich, corresponding to 20 times adjusted EBITDA and nearly 15 times including targeted synergies of about $50 million (about a mid-single-digit percentage of Sovos’ cost of goods sold and operating expenses).