The JM Smucker Company has announced a definitive agreement to acquire Hostess Brands for $34.25 per share in a cash and stock transaction.
The transaction totals approximately $5.6bn, including $900m of net debt.
This acquisition will expand JM Smucker’s portfolio of brands and focus on convenient consumer occasions.
Key transaction details
Hostess Brands Assets: The acquisition includes Hostess Brands' sweet baked goods brands such as Hostess, Donettes, Twinkies, CupCakes, DingDongs, Zingers, CoffeeCakes, HoHos, Mini Muffins and Fruit Pies, along with the Voortman cookie brand.
It also encompasses manufacturing facilities in various locations and a distribution facility, bringing approximately 3,000 employees to the Company.
Compelling strategic rationale
Expanding brand portfolio: This acquisition complements the Company's existing brands, expanding its presence in the sweet baked goods category.
Convenient occasion strategy: The acquisition aligns with the Company's strategy to provide consumers with convenient solutions across different meal and snacking occasions, leveraging the strengths of both organisations.
Financial strength: Hostess Brands' financial profile enhances the Company's confidence in achieving long-term growth goals and increasing shareholder value.
Executive Comments
The JM Smucker chair of the board, president and CEO Mark Smucker expressed excitement about the acquisition, emphasising the expansion of their brand family and focus on delivering convenient solutions to consumers.
Andy Callahan, President and CEO of Hostess Brands, highlighted the partnership's potential to accelerate growth and create value for consumers, customers and shareholders. Both companies share a commitment to inspiring moments of joy through their products.
Financial highlights
The transaction is expected to contribute approximately $1.5bn in net sales with an estimated mid-single-digit annual growth rate.
Annual cost synergies of about $100m are anticipated within the first two years. Adjusted earnings per share are expected to increase in the first fiscal year.
Transaction details
The Company will commence an exchange offer through its subsidiary SSF Holdings to acquire all outstanding Hostess shares at $34.25 per share, with $30.00 in cash and 0.03002 of a Company common stock share.
The transaction is subject to regulatory approvals and is set to close in the third quarter of the Company's fiscal year ending 30 April 2024.
The acquisition will be funded through cash on hand, a bank term loan and long-term public bonds. The Company secured $5.2bn in bridge financing and intends to maintain its balanced capital deployment model.
The boards of directors of both The JM Smucker Company and Hostess Brands unanimously approved the transaction.
RBC Capital Markets is the lead financial advisor, with BofA Securities also advising the Company. Wachtell, Lipton, Rosen & Katz serves as legal advisor.
