Yesterday, the J.M. Smucker Company, otherwise known as Smucker, announced its agreement to acquire Hostess Brands for a substantial $5.6 billion, which includes debt. The move brings together two of America’s prominent snack manufacturers. Who owns Hostess Brands now? It’s Smucker.
The Hostess transaction is valued at roughly $4.6 billion when excluding the debt, with Jif peanut butter producer Smucker agreeing to pay Hostess shareholders a sum of $34.25 per share. Reflecting a 54 percent premium since Reuters first reported on the potential sale, the cash-and-stock proposition stands as a lucrative deal for shareholders.
Hostess’ stock experienced a 27 percent surge post the sale report and climbed to $33.49 (a 19 percent increase) in the early trading sessions of Monday. Conversely, Smucker’s shares dipped by seven percent, with investors seemingly finding the deal to be on the steeper side.
When is the transaction set to conclude? The acquisition, set to finalize in Smucker’s current fiscal year’s third quarter, equates to an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) multiple of approximately 17.2 times, based on Smucker’s projections of Hostess Brands’ 2023 outcomes.
For context, Campbell Soup’s recent acquisition of Sovos Brands, the makers of Rao’s sauce, was pegged at an adjusted EBITDA multiple of 14.6 times, considering run rate savings and 19.8 times without.
Smucker’s investment in Hostess comes at a time when significant US packaged food companies are on the hunt to broaden their brand collections, especially as the financial windfalls from the pandemic era begin to ebb. Who owns Hostess Brands is a question reflecting the broader trend of mergers and acquisitions in the industry, particularly as brands seek reinvention post-pandemic.
So, who owns Hostess Brands after its financial ups and downs? The brand turned into an acquisition hotspot when its price hikes augmented revenues but simultaneously sparked concerns among investors due to its dwindling volume growth.
The union of Smucker and Hostess is just a chapter in the larger narrative of recent mergers in the sector, with noteworthy mentions like Campbell Soup’s $2.7 billion venture with Sovos Brands and Unilever’s acquisition of the premium frozen yogurt brand, Yasso, in North America.
Hostess Brands’ Turbulent History
Established in 1930 in Lenexa, Kansas, Hostess stands as the proud creator of iconic brands such as Twinkies, Ho-Hos, Ding Dongs, Zingers and Voortman cookies and wafers.
The alliance with Smucker is a significant turning point for Hostess, which has previously faced bankruptcy (in 2004 and 2012). The reasons ranged from excessive debt incurred by private equity owners to a lack of innovative snacking options.
In a transformative move, entrepreneur Dean Metropoulos collaborated with the private equity corporation Apollo Global Management Inc and reintroduced Hostess to the stock market in 2016. This was facilitated through an arrangement with a special purpose acquisition company supported by the private equity group spearheaded by Alec Gores.
Fast forward to 2020, Hostess had not only rejuvenated its portfolio but was also registering revenues exceeding $1 billion. This marked a crucial juncture in its revival journey. As for its financial strategy, the brand sometimes hiked prices to maintain revenue growth, especially when sales volumes dwindled.
Meanwhile, Smucker, a brand known for its coffee and pet food divisions, boasts a market cap surpassing $13 billion. The company also recently escalated the prices of its jams and jellies, contributing to an optimistic profit outlook for the year.
As the dust settles on the significant acquisition, the recurring question of “who owns Hostess Brands?” now finds its answer in the J.M. Smucker Company.