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Let’s TalkThe J.M. Smucker Company To Acquire Hostess Brands in Kansas
The J.M. Smucker Company makes an offer to acquire Twinkies producer Hostess Brands at a valuation of USD $5.6 billion.
The J.M. Smucker Company, a publicly listed American manufacturer of food and beverage products headquartered in Ohio, United States, has made an offer to acquire Hostess Brands, another publicly listed American food company based in Kansas, United States, on September 11, 2023. The deal is subject to approval and expected to close by the first quarter of 2024.
Transaction Summary
Our Take on the Acquisition
The J.M. Smucker Company (acquirer) acquired Hostess Brands (target) for its popular brands like Twinkies, Ding Dongs, Donettes, Zingers, HoHos, and much more. These products will serve as a complement to J.M. Smucker’s product portfolio. In addition, the company has estimated that there will be USD $100 million in cost synergies in the first two years of the acquisition. The acquisition price of USD $34.25 was at a premium of 23% over Hostess Brands’ market price of USD $27.77 on the day of the announcement. Hostess Brands’ share price increased to match the proposed acquisition price, while J.M. Smucker recorded a small decrease. This implies that the J.M. Smucker Company may have paid a fair price for the acquisition.
The Facts of the Acquisition
- Target: Hostess Brands is a publicly owned American manufacturer of snacks and baked goods and is the producer of Twinkies, Ding Dongs, Snoballs, Fruit Pies, and many other famous sweet snacks. It is based in Kansas and sells primarily in North America.
- Acquirer: The J.M. Smucker Company is a publicly listed food, beverages, and pet foods products manufacturer. The company headquarters is in Ohio, United States, and it has been in operation since 1897. Smucker owns brands like Dunkin’, a fast service restaurant chain, and Jif, a peanut butter brand.
The Transaction
| Date: | September 11, 2023 |
| Price: | USD $5.6 billion |
| Purpose: | To expand products portfolio |
| Details: | The deal is for all outstanding shares of Hostess Brands. The breakdown is USD $30 cash per share and 0.03002 stock of The J.M. Smucker Company valued at USD $4.25 for each share of Hostess Brands for a total consideration of $34.25 for each share. |
| Acquirer’s Statement: | Mark Smucker, Chair of the Board, President and Chief Executive Officer of The J. M. Smucker Co. – “We are excited to announce the acquisition of Hostess Brands, which represents a compelling expansion of our family of brands and a unique opportunity to accelerate our focus on delighting consumers with convenient solutions across different meal and snacking occasions. With this acquisition, we are adding an iconic sweet snacking platform; enhancing our ability to deliver brands consumers love and convenient solutions they desire; and leveraging the attributes Hostess Brands offers, including its strong convenience store distribution and leading innovation pipeline, combined with our strong commercial organization and consistent retail execution across channels to drive continued growth. Our organization is well positioned to deliver on the great potential our expanded family of brands offers, as has been reflected by our history of growth through acquisition and the successful integration of new categories to our business. We look forward to this exciting new chapter for The J.M. Smucker Co.” |
Target/Seller: Hostess Brands
Company Information
| Target: | Hostess Brands |
| Website: | hostessbrands.com |
| Founded: | 2013 |
| Industry: | Food and Beverage Producer |
| Type: | Publicly Listed Company (Ticker: TWNK on NASDAQ) |
| Employees: | 3,000 (Source: company website) |
| Locations: | Head Office: 7905 Quivira Road, Lenexa, Kansas, United States |
Product Information
| Products: | Breakfast Treats: Sweet breakfast foods like coffee cakes and donuts Snacks: Sweet single snacks such as Twinkies, Fruit Pies, HoHos, Cupcakes, Ding Dongs, Zingers, and Snoballs Bread Products: Bread and buns Baked Goods: Cakes, muffins, cookies, and cupcakes |
| Brands: (partial list): | Cupcakes Ding Dongs HoHos Snoballs Twinkies Zingers |
| Market Reach (by revenue): | United States Canada Mexico United Kingdom |
Financial Information
| Market Cap: | USD $4.45 billion |
| Revenue: | USD $1.36 billion (Source: Pitchbook) |
| Revenue per Employee: | USD $452,666 (i.e., USD $1.36 billion / 3,000 employees = USD $452,666 – estimated based on the self-reported number of employees and revenue from Pitchbook) |
| EBITDA: | USD $312 billion |
| P/E Ratio: | 26.4 |
| EV/EBITDA Ratio: | 12.4x |
Did You Know?
With the global pandemic in the rearview mirror, people are once again on the go, so conveniently portioned and packaged confectioneries and snacks are experiencing a big resurgence. Revenue in the United States confectionery and snacks market is predicted to amount to USD $304 billion in 2023. The market is expected to grow annually by a compound annual growth rate (CAGR) of 3.09%. It is forecast that the average person globally will consume 57.7 lbs of confectioneries and snacks in 2023.
Target/Seller Overview: Hostess Brands
Hostess Brands is a leading sweet snacks company focused on developing, manufacturing, marketing, selling, and distributing snacks in North America, providing a wide range of snack cakes, donuts, sweet rolls, pastries, and related products. The company was formed in 2013 after it acquired brands and properties relating to Twinkies and other popular brands from the previous owner, Old HB, which filed for bankruptcy. Old HB, Inc., known as Hostess Brands from 2009 to 2013, was founded in 1930 as the Interstate Bakeries Corporation, a U.S. wholesale bakery products producer and distributor.
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Explore Your Options NowBuyer/Acquirer: The J.M. Smucker Company
Company Information
| Buyer: | The J.M. Smucker Company |
| Website: | jmsmucker.com |
| Founded: | 1897 |
| Industry: | Food and Beverage Producer |
| Type: | Publicly listed company (Ticker: SJM on NYSE) |
| Employees: | 5,800 (Source: Pitchbook) |
| Locations: | Head Office: One Strawberry Lane, Orrville, Ohio, United States |
Product Information
| Products: | Coffee: A variety of instant coffees Consumer Foods: Peanut butter, jam, snacks, and other items Pet Foods: Pet foods and snacks for dogs and cats |
| Brands: (partial list): | Cafe’ Bustelo Carnation Dunkin’ Folgers Jif Meow Mix Milk Bone Pup-Peroni Robin Hood |
| Market Reach (by revenue): | United States Canada |
Financial Information
| Market Cap: | USD $13.26 billion |
| Revenue: | USD $8.5 billion (Source: Pitchbook) |
| Revenue per Employee: | USD $1.47 million (i.e., USD $8.5 billion / 5,800 employees = USD $1.47 million – estimated based on the number of employees and revenue from Pitchbook) |
| EBITDA: | USD $574 million |
| P/E Ratio: | N/A – The company reported a net loss |
| EV/EBITDA Ratio: | 36.2x |
Buyer/Acquirer Overview: The J.M. Smucker Company
The J.M. Smucker Company is a publicly listed food and beverage products manufacturer founded in 1897 in Ohio, United States, as an apple butter producer. The company has since evolved and currently has three major business units, including coffee, consumer foods, and pet foods, and is the owner of brands like Dunkin’ and Folgers.
Previous Acquisitions by The J.M. Smucker Co. (Partial List)
- Ainsworth Pet Nutrition (2018) – Based in Pennsylvania, United States, the company makes multiple brands and types of dog and cat foods. The consideration amount was USD $1.7 billion.
- Conagra Brands – Wesson Oil Brand (2017) – A cooking oil provider headquartered in Illinois, United States. The consideration amount was USD $285 million.
- Big Heart Pet Brands (2015) – A pet food and pet snacks manufacturer based in California, United States.
- Sahale Snacks (2014) – A natural gourmet snacks and mixed nuts producer headquartered in Washington, United States.
- Enray (2013) – Offers processed and packaged foods and grains and is based in California, United States.
Sources
- Company Profile
- Other Sources
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