J.M. Smucker said on Monday it will buy Twinkies-maker Hostess Brands in a US$5.6-billion deal, as major U.S. packaged food companies look to expand their brand portfolios with pandemic-era fortunes dwindling.
On Sunday, sources familiar with the matter told Reuters that the Jif peanut butter maker was nearing a deal to buy Hostess for close to $5 billion, excluding the latter’s net debt of about $900 million.
Shares of Hostess were up 16.3% in premarket trading on Monday, while J.M. Smucker’s stock was down 7.5%.
Hostess has a market capitalization of about $3.73 billion, according to LSEG data, following a nearly 27% jump in its stock since Aug. 25, when Reuters reported the company was exploring a sale after fielding takeover interest from major food makers.
J. M. Smucker will pay Hostess shareholders $34.25 per share in a cash and stock deal, representing a premium of 54% since the day before the report surfaced. The equity value of the deal is $4.55 billion, as per Reuters calculations.
Hostess Brands became an acquisition target after it managed to boost its revenue through price hikes that fuelled investor concerns over its prospects with its volume growth consistently declining.
It was then reported that General Mills Inc., Mondelez International Inc., PepsiCo Inc. and Hershey Co. were among those that had shown an interest in buying Hostess.
In recent months, the U.S. packaged food industry has seen an uptick in mergers after major companies have started to witness benefits from price hikes to taper off.
The J.M. Smucker and Hostess deal follows a spree of other deals including that of Campbell Soup’s $2.7-billion deal for Rao’s sauce maker Sovos Brands and Unilever buying premium frozen yogurt brand Yasso in North America.
Based in Lenexa, Kansas, Hostess was founded in 1930 and is behind several iconic household brands, including Ho-Hos, Ding Dongs, Zingers, and Voortman cookies and wafers.
The company filed for bankruptcy twice, in 2004 and 2012, due to a combination of private equity owners saddling it with debt and failing to come up with new snacks that appealed to consumers.
J.M. Smucker, which also houses coffee and pet food brands, has a market value of over $14 billion and had raised prices of its jams and jellies which helped boost its profit forecast for the year.
(Reporting by Dimpal Gulwani and Ananya Mariam Rajesh in Bengaluru and Anirban Sen in New York; Editing by Savio D’Souza and Shinjini Ganguli)