(Reuters) -U.S. packaged food maker Campbell Soup (NYSE:CPB) will buy Michael Angelo's and Rao's owner Sovos Brands for $2.33 billion in cash, the company said on Monday, beefing up its meals and beverages business with the maker of premium Italian sauces.
Campbell will pay $23 per share for Sovos, a nearly 28% premium to the stock's last close.
Sovos' shares were trading at $22.48 while Campbell slipped 1.2% to $44.58 in early trade.
The global food and beverage industry has been a relatively bright spot for deal-making in recent quarters. Last month, Unilever (NYSE:UL) said it would buy frozen yogurt brand Yasso in North America while Mars Inc agreed to buy Kevin's Natural Foods.
In May, Campbell Soup sold Emerald Nuts to Flagstone Foods for an undisclosed amount.
Campbell's meals and beverages division includes its ready-to-serve soups, tomato juice, gravies, and dinner sauces that are sold in the U.S. and Canada, and was its top revenue generator in 2022, according to its annual report.
"The acquisition comes at a considerable cost, but we believe it is a strategic move that strengthens Campbell's product portfolio with fast-growing brands," said CFRA Research analyst Arun Sundaram.
Packaged food makers have been buoyed as cautious consumers have preferred to spend on essentials and limit their visits to restaurants. They have also raised product prices several times to protect their margins from higher input costs.
Separately, Sovos reported a 16.3% jump in organic net sales for the second-quarter, driven by increased volumes despite higher pricing.
Including debt, the deal is valued at $2.7 billion. Campbell plans to finance the purchase through new debt.
The transaction, expected to close by the end of December, is likely to add to adjusted earnings per share by the second year after the deal closes.