- Expands the Company's family of beloved brands in attractive
categories with the addition of iconic snacking brands.
- Furthers the Company's ability to delight consumers with
convenient food options across more snacking and meal
occasions.
- Enhances the Company's net sales growth, operating margin
and earnings growth.
- Expected to be accretive to adjusted earnings per share in
the first fiscal year.
- The Company will discuss the transaction during a conference
call today at 9:00
a.m. Eastern Time.
ORRVILLE, Ohio, Sept. 11,
2023 /PRNewswire/ -- The J. M. Smucker Co. (NYSE:
SJM) ("Company") announced today the signing of a definitive
agreement to acquire Hostess Brands, Inc. (NASDAQ: TWNK) ("Hostess
Brands") for $34.25 per share in a
cash and stock transaction, representing a total enterprise value
of approximately $5.6 billion,
which includes approximately $900
million of net debt. This represents an adjusted EBITDA
multiple of approximately 17.2x based on the Company's estimate of
Hostess Brands full year 2023 results, and an approximate 13.2x
multiple when including anticipated run rate synergies of
$100 million. The acquisition expands
the Company's offering of beloved brands in growing categories
and accelerates its focus on convenient consumer occasions.
The transaction includes the Hostess Brands sweet baked goods
brands (Hostess® Donettes®, Twinkies®,
CupCakes, DingDongs®, Zingers®,
CoffeeCakes, HoHos®, Mini Muffins and
Fruit Pies) and the Voortman® cookie
brand, along with manufacturing facilities in Emporia, Kansas; Burlington, Ontario; Chicago, Illinois; Columbus, Georgia; Indianapolis, Indiana and Arkadelphia, Arkansas (which is currently
under construction) and a distribution facility in Edgerton, Kansas. Additionally, approximately
3,000 employees will join the Company in conjunction with the
transaction.
Compelling Strategic Rationale
Benefits of the transaction include the
following:
- Expanding Family of Brands Consumers Love: The
acquisition adds Hostess Brands iconic 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
categories.
- Accelerating the Company's Convenient Occasion Strategy:
The acquisition positions the Company to deliver on consumer needs
across occasions with greater convenience and selection. Further,
the Company 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.
Executive Comments
"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 Chief Executive
Officer.
"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."
Andy Callahan, President and
Chief Executive Officer of Hostess Brands commented, "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 Hostess Brands as we combine our
iconic snacking brands with The J.M. Smucker Co.'s family of
beloved 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."
Financial Highlights
The acquisition strengthens the Company's financial profile and
provides shareholders significant value by accelerating growth in
convenient consumer occasions. 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
The Company, through its wholly owned subsidiary SSF Holdings,
Inc., will commence an exchange offer to acquire all outstanding
shares of Hostess at a price of $34.25 per share of Hostess common stock,
consisting of $30.00 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 Friday,
September 8, 2023) to be exchanged for each Hostess share.
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,
the Company 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. The transaction is not subject to a
financing condition. The Company has secured $5.2 billion in a fully committed bridge
financing from Bank of America, N.A. and RBC Capital Markets LLC.
Pro forma total net debt estimated at the closing date will be
approximately $8.6 billion and the
pro forma total net debt-to-EBITDA ratio is expected to be
approximately 4.4x. The Company intends to maintain its balanced
capital deployment model, along with an investment grade debt
rating.
The transaction is anticipated to close in the third quarter of
the Company's current fiscal year ending April 30, 2024. The transaction has been
unanimously approved by the boards of directors of both The J.M.
Smucker Co. and Hostess Brands, Inc.
RBC Capital Markets LLC is serving as lead financial advisor to
the Company in connection with the transaction. BofA Securities is
also serving as financial advisor to the Company. Wachtell,
Lipton, Rosen & Katz is
serving as the Company's legal advisor.
Conference Call
The Company will host a conference call and webcast with
Mark Smucker, Chair of the Board,
President and Chief Executive Officer, and Tucker Marshall, Chief Financial Officer, today
at 9:00 a.m. Eastern Time. Analysts
and investors can participate in the conference call by dialing
(877) 407-2991 or if calling from outside the U.S. +1 (201)
389-0925. No access code is required.
A listen-only live webcast of the conference call, as well as a
replay, can be accessed at investors.jmsmucker.com.
About The J.M. Smucker Co.
At The J.M. Smucker Co., it is our privilege to make food people
and pets love by offering a diverse family of brands available
across North America. We are proud
to deliver on consumers' needs in the coffee, consumer foods, dog
snacks and cat food categories by offering brands consumers trust
for themselves and their families each day including
Folgers®, Dunkin'®,
Café Bustelo®, Jif®, Smucker's® Uncrustables®,
Smucker's®, Milk-Bone® and Meow Mix®. Through
our unwavering commitment to producing quality products, operating
responsibly and ethically and delivering on our Purpose, we will
continue to grow our business while making a positive impact on
society. For more information, please visit
jmsmucker.com.
The J.M. Smucker Co. is the owner of all trademarks referenced
herein, except for Dunkin'®, which is a trademark of DD IP
Holder LLC. The Dunkin'® brand is licensed to
The J.M. Smucker Co. for packaged coffee products sold in retail
channels such as grocery stores, mass merchandisers, club stores,
e-commerce and drug stores. This information does not pertain to
products for sale in Dunkin'®
restaurants.
Forward Looking Statements
This press release includes certain forward-looking statements
within the meaning of federal securities laws that involve risks
and uncertainties relating to future events and the future
performance of the Company and Hostess Brands, including
regarding the Company's proposed acquisition of Hostess Brands, the
prospective benefits of the proposed acquisition, the potential
consideration amount and the terms and the anticipated occurrence,
manner and timing of the proposed exchange offer and the closing of
the proposed acquisition. The forward-looking statements may
include statements concerning our current expectations, estimates,
assumptions and beliefs concerning future events, conditions, plans
and strategies that are not historical fact. Any statement that is
not historical in nature is a forward-looking statement and may be
identified by the use of words and phrases such as "expect,"
"anticipate," "believe," "intend," "will," "plan," "strive" and
similar phrases. Federal securities laws provide a safe harbor for
forward-looking statements to encourage companies to provide
prospective information. We are providing this cautionary statement
in connection with the safe harbor provisions. Readers are
cautioned not to place undue reliance on any forward-looking
statements, which speak only as of the date made, when evaluating
the information presented in this press release, as such statements
are by nature subject to risks, uncertainties and other factors,
many of which are outside of our control and could cause actual
results to differ materially from such statements and from our
historical results and experience. These risks and uncertainties
include, but are not limited to, the following: uncertainties
relating to the timing of the exchange offer and merger between the
Company, SSF Holdings, Inc., a Delaware corporation and wholly owned
subsidiary of the Company, and Hostess Brands (the "Transaction");
uncertainties as to how many of Hostess Brands stockholders will
tender their stock in the exchange offer; the possibility that
competing offers will be made; the possibility that any or all of
the conditions to the consummation of the Transaction may not be
satisfied or waived, including failure to receive required
regulatory approvals; the possibility that the Transaction does not
close; risks related to the Company's ability to realize the
anticipated benefits of the Transaction, including the possibility
that the expected benefits will not be realized or will not be
realized within the expected time period; the effect of the
announcement or pendency of the Transaction on the Company's
ability to retain key personnel and to maintain relationships with
customers, suppliers and other business partners; risks relating to
potential diversion of management attention from the Company's
ongoing business operations; negative effects of this announcement
or the consummation of the Transaction on the market price of the
Company's or Hostess Brands common stock and/or operating results;
transaction costs associated with the Transaction disruptions or
inefficiencies in the Company's operations or supply chain,
including any impact caused by product recalls (including the
Jif® peanut butter product recall); political instability,
terrorism, armed hostilities (including the ongoing conflict
between Russia and Ukraine); extreme weather conditions; natural
disasters; pandemics (including the novel coronavirus); work
stoppages or labor shortages, or other calamities; risks related to
the availability, and cost inflation in, supply chain inputs,
including labor, raw materials, commodities, packaging, and
transportation; the impact of food security concerns involving
either the Company's products or its competitors' products,
including changes in consumer preference, consumer litigation,
actions by the U.S. Food and Drug Administration or other agencies,
and product recalls; risks associated with derivative and
purchasing strategies the Company employs to manage commodity
pricing and interest rate risks; the availability of reliable
transportation on acceptable terms; the ability to achieve cost
savings related to restructuring and cost management programs in
the amounts and within the time frames currently anticipated; the
ability to generate sufficient cash flow to continue operating
under the Company's capital deployment model, including capital
expenditures, debt repayment, dividend payments, and share
repurchases; the ability to implement and realize the full benefit
of price changes, and the impact of the timing of the price changes
to profits and cash flow in a particular period; the success and
cost of marketing and sales programs and strategies intended to
promote growth in the Company's businesses, including product
innovation; general competitive activity in the market, including
competitors' pricing practices and promotional spending levels; the
Company's ability to attract and retain key talent; the
concentration of certain of the Company's businesses with key
customers and suppliers, including single-source suppliers of
certain key raw materials and finished goods, and the Company's
ability to manage and maintain key relationships; impairments in
the carrying value of goodwill, other intangible assets, or other
long-lived assets or changes in the useful lives of other
intangible assets or other long-lived assets; the impact of new or
changes to existing governmental laws and regulations and their
application; the outcome of tax examinations, changes in tax laws,
and other tax matters; a disruption, failure, or security breach of
the Company or their suppliers' information technology systems,
including, but not limited to, ransomware attacks; and foreign
currency exchange rate and interest rate fluctuations.
A more complete description of these and other material risks
can be found under "Risk Factors" in reports and statements filed
by the Company and Hostess Brands respectively with the U.S.
Securities and Exchange Commission (the "SEC"), including each of
the Company's and Hostess Brands most recent Annual Reports on Form
10-K, as well as the Form S-4 and related exchange offer documents
to be filed by the Company and its acquisition subsidiary, SSF
Holdings, Inc. and the Schedule 14D-9 to be filed by Hostess
Brands. The Company does not undertake any obligation to update or
revise these forward-looking statements, which speak only as of the
date made, to reflect new events or circumstances.
Non-GAAP Financial Measures
The Company uses non-GAAP financial measures, including: net
sales excluding divestitures and foreign currency exchange;
adjusted gross profit; adjusted operating income; adjusted income;
adjusted earnings per share; earnings before interest, taxes,
depreciation, amortization, impairment charges related to
intangible assets, and gains and losses on divestitures ("EBITDA
(as adjusted)"); and free cash flow, as key measures for purposes
of evaluating performance internally. The Company believes that
investors' understanding of its performance is enhanced by
disclosing these performance measures. Furthermore, these non-GAAP
financial measures are used by management in preparation of the
annual budget and for the monthly analyses of its operating
results. The Board of Directors also utilizes certain non-GAAP
financial measures as components for measuring performance for
incentive compensation purposes.
Non-GAAP financial measures exclude certain items affecting
comparability that can significantly affect the year-over-year
assessment of operating results, which include amortization expense
and impairment charges related to intangible assets; certain
divestiture, acquisition, integration, and restructuring costs
("special project costs"); gains and losses on divestitures; the
net change in cumulative unallocated gains and losses on commodity
and foreign currency exchange derivative activities ("change in net
cumulative unallocated derivative gains and losses"); and other
infrequently occurring items that do not directly reflect ongoing
operating results. Income taxes, as adjusted is calculated using an
adjusted effective income tax rate that is applied to adjusted
income before income taxes and reflects the exclusion of the
previously discussed items, as well as any adjustments for one-time
tax-related activities, when they occur. While this adjusted
effective income tax rate does not generally differ materially from
the GAAP effective income tax rate, certain exclusions from
non-GAAP financial measures can significantly impact the adjusted
effective income tax rate.
These non-GAAP financial measures are not intended to replace
the presentation of financial results in accordance with U.S. GAAP.
Rather, the presentation of these non-GAAP financial measures
supplements other metrics used by management to internally evaluate
its businesses and facilitate the comparison of past and present
operations and liquidity. These non-GAAP financial measures may not
be comparable to similar measures used by other companies and may
exclude certain nondiscretionary expenses and cash payments.
Additional Information and Where to Find It
The exchange offer referenced in this press release has not yet
commenced. This press release is for informational purposes only
and is neither an offer to purchase nor a solicitation of an offer
to sell any securities, nor is it a substitute for the exchange
offer materials that Hostess Brands, the Company, or its
acquisition subsidiary, SSF Holdings, Inc., will file with the SEC.
This press release does not constitute an offer to sell
or the solicitation of an offer to buy any securities, nor shall
there be any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such
jurisdiction. The solicitation and offer to buy Hostess
Brands stock will only be made pursuant to an Offer to Exchange and
related exchange offer materials that the Company intends to file
with the SEC. At the time the exchange offer is commenced, the
Company and its acquisition subsidiary will file a tender offer
statement on Schedule TO, the Company will file a registration
statement on Form S-4 and thereafter Hostess Brands will file a
Solicitation/Recommendation Statement on Schedule 14D-9 with the
SEC with respect to the exchange offer. HOSTESS BRANDS'
STOCKHOLDERS AND OTHER INVESTORS ARE URGED TO READ CAREFULLY THE
EXCHANGE OFFER MATERIALS (INCLUDING AN OFFER TO EXCHANGE, A RELATED
LETTER OF TRANSMITTAL AND CERTAIN OTHER EXCHANGE OFFER DOCUMENTS)
AND THE SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9
BECAUSE THEY WILL EACH CONTAIN IMPORTANT INFORMATION THAT HOLDERS
OF HOSTESS BRANDS SECURITIES AND OTHER INVESTORS SHOULD CONSIDER
BEFORE MAKING ANY DECISION WITH RESPECT TO THE EXCHANGE OFFER. The
Offer to Exchange, the related Letter of Transmittal, certain other
exchange offer documents, as well as the
Solicitation/Recommendation Statement on Schedule 14D-9, will be
made available to all stockholders of Hostess Brands at no expense
to them and will also be made available for free at the SEC's
website at www.sec.gov. Additional copies may be obtained for
free by contacting either the Company or Hostess Brands. Copies of
the documents filed with the SEC by Hostess Brands will be
available free of charge on Hostess Brands website at
https://www.hostessbrands.com. Copies of the documents filed with
the SEC by the Company will be available free of charge on the
Company's website at https://investors.jmsmucker.com.
In addition to the Offer to Exchange, the related Letter of
Transmittal and certain other exchange offer documents, as well as
the Solicitation/Recommendation Statement on Schedule 14D-9, the
Company and Hostess Brands each file annual, quarterly and current
reports, proxy statements and other information with the SEC, which
are available to the public over the Internet at the SEC's website
at http://www.sec.gov.
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SOURCE The J.M. Smucker Co.