JM Smucker, the 126-year-old company known for products like fruit spreads, Jif peanut butter, and Folgers coffee, has announced its acquisition of Hostess Brands, the maker of Twinkies, in a $5.6 billion, or $34.25 a share deal.
As part of this agreement, Smucker will gain ownership of popular baked treats like Twinkies, Devil Dogs, and Hostess Cupcakes, as well as the health-conscious Voortman Cookie brand, which Hostess acquired in January 2020 as an expansion of its sugar-free offerings. The transaction involves approximately 3,000 Hostess employees joining Smucker, and the merger is expected to be finalized by April 2024.
Hostess shareholders will be compensated with $30 in cash and approximately 0.03002 shares of Smucker’s stock for each of their Hostess shares, while Smucker will also undertake Hostess’ debt amounting to approximately $900 million.
Smucker’s acquisition is part of a recent wave of activities within the Big Food industry, driven by the search for growth opportunities as the momentum gained during the COVID-19 pandemic diminishes. For instance, Campbell’s Soup recently revealed its acquisition of Sovos Brands, the owner of Rao’s pasta sauce, for $2.7 billion. Mars, the owner of M&M’s, acquired Kevin’s Natural Foods in July, while Unilever acquired the frozen yogurt brand Yasso in June. Following the announcement, Hostess shares surged by 18% in premarket trading, while Smucker’s stock experienced a 7.5% decline.
Mark Smucker, the CEO of Smucker’s, credited the year-over-year growth to the “key growth areas of coffee, snacking, and pet.” In contrast, Hostess has faced a tumultuous journey throughout its 104 years in business, enduring two bankruptcies before reaching this multibillion-dollar sale. These Chapter 11 bankruptcies, occurring in 2004 and 2014, were primarily linked to the company’s inability to innovate and introduce new snacks.
As of the market close on Friday, Hostess’s shares have surged by 25% this year, resulting in a market valuation of $3.73 billion. However, the company’s shares had already experienced a substantial increase following reports in late August by Reuters, indicating that Hostess was exploring a potential sale after receiving interest from major food corporations, including PepsiCo and Mondelez International.
The acquisition by Smucker marks the conclusion of Hostess’ seven-year period as an independent, publicly traded company, during which it initially became public through a merger with a special purpose acquisition company in 2016.
(Source: Reuters | Shannon Thaler | NY Post | Amelia Lucas | CNBC)
