- M&A
- September 11, 2023
- 3 minutes read
Food Giant Smucker’s to Buy Twinkies Maker Hostess for $4.6B
Smucker’s (NYSE: SJM), an American food and beverage giant, has struck a deal to acquire Hostess Brands (NASDAQ: TWNK), a…
Smucker’s (NYSE: SJM), an American food and beverage giant, has struck a deal to acquire Hostess Brands (NASDAQ: TWNK), a bakeries company best known for its Twinkies snack cake. Smucker’s, formally The J.M. Smucker Company, will pay $4.6bn in cash and stock for Hostess. It’ll also assume $900mn in net debt, bringing the deal’s enterprise value to $5.5bn.
Smucker’s is paying $34.25 per Hostess share, $30 in cash and $4.25 in Smucker’s shares, or $4bn in cash and $600mn in shares. The price represents a 54% premium to Hostess’s market value before reports of an imminent sale emerged.
- The current Hostess Brands was formed from the ashes of an eponymous bankrupt bakeries company. In 2013, Hostess Brands, a bakeries company with 19,000 employees, filed for bankruptcy. Two private equity firms, Apollo Global (NYSE: APO) and C. Dean Metropoulos and Company, teamed up to acquire snack cake assets from the bankrupt company and retained the original name for further operations.
- The two private equity firms paid $410mn for the assets and infused more capital to acquire additional bakeries brands under the Hostess umbrella. In 2016, they took Hostess public via a merger with a special-purpose acquisition company (SPAC).
- Hostess was valued at $2.3bn in its 2016 SPAC merger and is selling for double that amount seven years later. A year before the merger, Appollo and C. Dean Metropolous issued a $1.2bn loan facility and paid themselves a $905mn special dividend. Needless to say, both firms will record sizeable profits after selling Hostess to Smucker’s.
Smucker’s is a beverage giant that reported $630mn in profit on $8bn in revenue in 2022. It makes consumer foods, pet foods, and coffee products; the company is famous for its fruit spreads, peanut butter, and ice cream toppings.
Hostess reported a $164mn net profit on $1.36bn in revenue in 2022. Acquiring Hostess is an easy way for Smucker’s to expand its business. The acquirer has arranged $5.2bn in fresh debt financing to fund the acquisition and its further operations.
Barring regulatory hurdles, Smucker’s expects the deal to close before this year’s ending. The company’s shares fell 7% on Monday following the acquisition announcement, meaning investors aren’t overly in favor (the deal looks too expensive to some, given that Smucker’s will double its debt load to fund it). Once the deal closes, Smucker’s expects to have $8.6bn in net debt.
