New York
J.M. Smucker, known for brands like Jif peanut butter and Folgers coffee, has announced its acquisition of Hostess Brands, the maker of popular snacks like Twinkies and Ho-Hos, in a deal valued at $5.6 billion. This move reflects a broader trend in the U.S. packaged food industry, where major companies are looking to expand their brand portfolios in response to changing consumer preferences and challenges related to the pandemic.
The equity value of the deal, based on calculations by Reuters, stands at $4.55 billion, with J.M. Smucker offering $34.25 per share to Hostess shareholders. This represents a significant premium of 54% over the stock’s value since Reuters first reported the company’s exploration of a potential sale. Shares of Hostess surged following the announcement, up 19% in premarket trading, while J.M. Smucker’s shares declined by 7%.
Hostess Brands became an attractive acquisition target due to its success in boosting revenue through price hikes, although concerns arose regarding its volume growth. This deal follows a series of mergers and acquisitions in the packaged food industry, with companies seeking to rebrand their portfolios and drive growth as the benefits of previous price increases have begun to wane.
J.M. Smucker expects the deal to close in the third quarter of its current fiscal year. The acquisition represents an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple of approximately 17.2 times, based on its estimate of Hostess Brands’ 2023 results. This strategic move positions J.M. Smucker to diversify its product offerings and expand its presence in the competitive packaged food market.
