Campbell Soup Company (NYSE:CPB) is kicking off this week with an important deal. The firm is expanding its holdings through the acquisition of Sovos Brands (NASDAQ:SOVO), the owner of three well-known food brands. This purchase stands to benefit both companies significantly. In particular, it will help industry leader Campbell secure a bigger share of the meals and beverages market.
While CPB stock isn’t rising on the news so far, SOVO stock was among the market’s top movers this morning. Shares are currently up by more than 20%. As InvestorPlace contributor William White reports, the canned soup conglomerate is paying $2.7 billion for Sovos, which values SOVO at $23 per share. This is a great deal for shareholders and the market is reacting accordingly so far.
Will CPB stock ultimately benefit from the strategic acquisition as well? Let’s take a closer look at the recent development and assess what investors can expect.
What’s Happening With CPB Stock?
There are few companies with more iconic branding than CPB and Campbell’s Soup. This has served the company well and helped it garner a reputation as a brand that U.S. shoppers both love and trust. For this reason, Campbell Soup stock is nothing if not dependable.
CPB stock has proven that it can hold its own in times of economic uncertainty, helping it earn its status as an “apocalypse stock.” For this reason, it’s hard to be too discouraged by the fact that shares are dipping slightly today despite news of the deal.
After all, this acquisition makes plenty of sense for Campbell Soup Company. Sovos’ holdings include sauce brand Rao’s, Noosa Yoghurt and Michael Angelo’s frozen food. All three of these names will help the firm expand into new sections of the consumer goods market, specifically meals. This comes at a good time as well. According to the Wall Street Journal, Rao’s “saw organic sales grow by more than a third in fiscal 2022.”
Campbell President and CEO Mark Clouse said the following about the new deal:
“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. With all this progress, I am confident in our readiness to execute and integrate this important acquisition.”
While the deal isn’t expected to fully close until December, it has been approved by both companies’ boards.
Why It Matters
As noted, Campbell is the kind of bellwether stock that offers investors stability. It’s easy to bet on, especially when economic conditions cast doubt over certain sectors. While it has been a difficult year so far for Campbell Soup stock — down 20% year-to-date (YTD) — this type of acquisition could be exactly what the company needs to pull back into the green.
The company known for one of the country’s most iconic food products is adding three more brands to its empire. That should only boost CPB stock after the deal closes.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.