J.M. Smucker to Acquire Twinkies-Maker Hostess Brands in $5.6 Billion Deal
September 11, 20XX
In a move to expand their brand portfolios amidst declining fortunes during the pandemic, J.M. Smucker has announced its plans to acquire Hostess Brands, the maker of popular snack Twinkies, in a deal worth $5.6 billion. The acquisition comes as major U.S. packaged food companies seek opportunities for growth.
Sources familiar with the matter revealed on Sunday that J.M. Smucker, known for its Jif peanut butter, was nearing a deal to purchase Hostess for close to $5 billion, excluding the latter’s net debt of about $900 million.
Following the announcement, Hostess’ stock rose by 16.3% in premarket trading on Monday, while J.M. Smucker’s stock experienced a decline of 7.5%.
With a market capitalization of approximately $3.73 billion, Hostess became an acquisition target after successfully boosting its revenue through price hikes. However, concerns over its declining volume growth raised doubts about its long-term prospects.
Several major food companies, including General Mills Inc, Mondelez International Inc, PepsiCo Inc, and Hershey Co, had shown interest in acquiring Hostess.
The U.S. packaged food industry has witnessed a surge in mergers in recent months as prominent companies have seen diminishing benefits from price hikes.
Under the terms of the deal, J.M. Smucker will pay Hostess shareholders $34.25 per share in a cash and stock arrangement, representing a premium of 54% compared to the share price prior to the report of the acquisition.
The equity value of the deal is estimated to be $4.55 billion, according to Reuters calculations.
Hostess Brands, founded in 1930 and based in Lenexa, Kansas, is known for iconic household brands such as Ho-Hos, Ding Dongs, Zingers, and Voortman cookies and wafers. The company faced bankruptcy twice, in 2004 and 2012.
J.M. Smucker, which also owns coffee and pet food brands, has a market value of over $14 billion. The company recently raised the prices of its jams and jellies, resulting in an improved profit forecast for the year.
This acquisition by J.M. Smucker follows a string of other deals in the packaged food industry, including Campbell Soup’s $2.7 billion acquisition of Rao’s sauce maker Sovos Brands and Unilever’s purchase of premium frozen yogurt brand Yasso in North America.
Overall, the deal between J.M. Smucker and Hostess Brands represents a significant consolidation in the packaged food industry, as companies look to adapt and strengthen their portfolios in the face of changing consumer demands and market conditions.
(Note: This article includes information sourced from Reuters reporters Dimpal Gulwani, Ananya Mariam Rajesh, and Anirban Sen)
Contact:
Anirban Sen
Editor in Charge, U.S. M&A
Reuters New York
+1 (646) 705 9409