J.M. Smucker Co. to Acquire Hostess Brands for $5.6B

ORRVILLE, Ohio — The maker of Twinkies is changing hands.

The J.M. Smucker Co. agreed to acquire Hostess Brands Inc. for $5.6 billion, including debt, in a deal that will tie up two major American snack makers. The acquisition will expand Orrville-based J.M. Smucker's offering of brands in growing categories and accelerates its focus on convenient consumer occasions, the company stated.

[Read more: 2023 Category Captain for Packaged Sweet Snacks: Hostess Brands]

"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," said Mark Smucker, chair of the board, president and CEO of J.M. Smucker.

"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," he continued. "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."

As part of the transaction, J.M Smucker will acquire Lenexa, Kan.-based Hostess Brands' sweet baked goods brands — including Hostess, Donettes, Twinkies, CupCakes, DingDongs, Zingers, CoffeeCakes, HoHos, Mini Muffins and Fruit Pies — and the Voortman cookie brand, in addition to manufacturing facilities in Emporia, Kan.; Burlington, Ontario; Chicago; Columbus, Ga.; Indianapolis; and Arkadelphia, Ark., which is currently under construction, and a distribution facility in Edgerton, Kan.

Additionally, approximately 3,000 employees will join the combined entity in conjunction with the transaction.

"I am extremely proud of the entire Hostess Brands team for the legacy they created in building a premier snacking company and driving industry leading returns for our investors. Today represents another exciting chapter for our company as we combine our iconic snacking brands with The J.M. Smucker Co.'s family of beloved brands," said Andy Callahan, president and CEO of Hostess Brands. "We believe this is the right partnership to accelerate growth and create meaningful value for consumers, customers and shareholders.

"Our companies share highly complementary go-to market strategies, and we are very similar in our core business principles and operations. Above all else, Hostess Brands and The J.M. Smucker Co. share a deep commitment to inspiring moments of joy and satisfaction through our products, and we look forward to continuing to do so as part of The J.M. Smucker Co. family," he added.

According to J.M. Smucker, strategic rationale and benefits of the transaction include:

• Expanding family of brands consumers love: The acquisition adds Hostess Brands snacks and innovation in the sweet baked goods category to the company's current offering of beloved brands in the attractive categories of coffee, peanut butter, frozen handheld, fruit spreads, dog snacks and cat food.
• Accelerating the company's convenient occasion strategy: The acquisition positions the company to deliver on consumer needs across occasions with greater convenience and selection. J.M. Smucker and Hostess Brands' complementary capabilities will drive further growth and innovation.
• Strengthening the company's financial profile: Hostess Brands offers a strong financial profile with a combination of scale and profitability that increases the company's confidence in delivering on its long-term growth goals and increasing shareholder value.

Financial Highlights

The acquisition strengthens J.M. Smucker's financial profile and provides shareholders significant value by accelerating growth in convenient consumer occasions, the snack manufacturer stated. Financial highlights of the transaction include:

• Net sales contribution of approximately $1.5 billion, with an estimated mid-single digit percentage annual growth rate.
• Annual run-rate cost synergies of approximately $100 million achieved within the first two years of ownership.
• Adjusted earnings per share expected to be accretive in the first fiscal year.
• Strong cash flow of combined business enables rapid deleveraging, while continuing to reinvest in the business.

Transaction Details

J.M. Smucker, through its wholly owned subsidiary SSF Holdings Inc., will commence an exchange offer to acquire all outstanding shares of Hostess Brands at a price of $34.25 per share of Hostess common stock, consisting of $30 of cash and .03002 of a share of the company's common stock (having a value of $4.25 based on the closing price of the company's common stock on Sept. 8) to be exchanged for each Hostess share.

[Read more: Hostess Brands Modernizes Corporate Identity]

The closing of the exchange offer will be subject to certain conditions, including the tender of at least a majority of the outstanding shares of Hostess common stock and other customary closing conditions, including receipt of required regulatory approvals. Upon the successful completion of the exchange offer, J.M. Smucker will acquire all of the remaining shares of Hostess common stock that were not tendered in the exchange offer through a second-step merger for the same consideration per share as paid in the exchange offer.

The cash portion of the transaction is expected to be funded through a combination of cash on hand, a bank term loan and long-term public bonds.

Both the boards of directors for J.M. Smucker and Hostess Brands have unanimously approved the transaction. The deal is expected to close in the third quarter of J.M. Smucker's current fiscal year, which ends April 30, 2024.

RBC Capital Markets LLC is serving as lead financial advisor to J.M. Smucker, and BofA Securities is serving as financial advisor. Wachtell, Lipton, Rosen & Katz is serving as the company's legal advisor.

Morgan Stanley & Co. LLC and Morgan, Lewis & Bockius LLP are serving as financial and legal advisors, respectively, to Hostess Brands.

J.M. Smucker is known for its Folgers, Dunkin', Café Bustelo, Jif, Smucker's Uncrustables, Smucker's Milk-Bone and Meow Mix brands. The Dunkin' brand is licensed to The J.M. Smucker Co. for packaged coffee products sold in retail channels.