JM Smucker to acquire Hostess in $5.6B deal
SAN FRANCISCO - SEPTEMBER 22: Hostess Twinkies sit on a table September 22, 2004 in San Francisco. Interstate Bakeries Corp., the largest U.S. wholesale bakery, maker of Wonder bread and Hostess Twinkies, filed for bankruptcy on Wednesday after strug
Hostess, the maker of snack classics like Twinkies and HoHos, is being sold to J.M. Smucker in a cash-and-stock deal worth about $5.6 billion.
Smucker, which makes everything from coffee to peanut butter and jelly, will pay $34.25 per share in cash and stock, and it will also pick up approximately $900 million in net debt.
Hostess Brands Inc. shareholders will receive $30 in cash and 0.03002 shares of The J.M. Smucker Co. stock for each share of stock that they own.
"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," Hostess President and CEO Andy Callahan said in a prepared statement Monday.
Twinkies went big when Hostess put them on shelves in 1930, and it followed up with a string of sweet concoctions like DingDongs, Zingers and Sno Balls.
In an interview with The Associated Press this year, Callahan talked about how Hostess Brands managed some of the most well-known brands in America, and also how balance was needed as Americans' tastes changed.
The company motored along for decades, but its struggles began to grow in this century, with workers blaming mismanagement and a failure to invest in brands to keep up with changing tastes. The Lenexa, Kansas, company said that it was weighed down by higher pension and medical costs than its competitors, whose employees weren’t unionized.
By 2012, the company with roots dating back to 1925, began selling off its brands in chunks to different buyers. Wonder was sold to Flowers Foods. McKee Foods, which makes Little Debbie snack cakes, snapped up Drake’s Cake, which includes Devil Dogs and Yodels.
The rest, including Twinkies and other Hostess cakes, was acquired by Metropoulos & Co. and Apollo, for $410 million.
Apollo Global Management, founded by Leon Black, buys troubled brands and tries to turn them around before selling them. It's done so with fast-food chains Carl’s Jr. and Hardee’s. Metropoulos & Co., which has revamped then sold off brands including Chef Boyardee and Bumble Bee, also owns Pabst Brewing Co.
Hostess reemerged in 2013 with a far less costly operating structure than its predecessor company and was no longer unionized.
Morgan Stanley's Pam Kaufman said that Hostess offered attractive revenue growth through its U.S. sweet snacks business and opportunities for international expansion. She anticipates merger and acquisition activity ramping up in the packaged food sector due to slowing revenue growth and strong balance sheets.
The boards of The J.M. Smucker Co. and Hostess have both approved the deal, which is expected to close in Smucker's fiscal third quarter.
Smucker's stock dropped 7%, while shares of Hostess surged 19%.