Mix peanut butter and jelly with a Twinkie and what do you get? Apparently a $5.6 billion breakfast.
This is the price that J.M. Smucker Company paid to acquire Hostess Brands, which includes debt, while Hostess pays its shareholders $34.25 per share.
The partnership combines two well-known grocery store snack brands: Smucker’s is known for its jellies, Jif peanut butter, Dunkin’ Coffee products and Uncrustables, while Hostess Brands is known for its Twinkies, Donuts, Ding Dongs and Hohos.
In a release, Smucker’s says the deal is in line with its “focus on convenient consumer opportunities” and expanding “the family of brands consumers love” in the grocery aisles.
“We believe this is the right partnership to accelerate growth and create meaningful value for consumers, customers and shareholders,” said Andy Callahan, President and CEO of Hostess Brands. “Our companies share highly complementary market strategies, and we are very similar in our core business principles and operations.”
And some agreed, with Hostess shares rising 19% early Monday on news of the sale process. But many of Smucker’s investors considered the sale too expensive, causing shares to fall 7%.
The deal between the brands is expected to be completed in the third quarter of Smucker’s current fiscal year, which ends April 30.
Smucker expects the transaction to cut costs by $100 million within two years and bring annual sales of about $1.5 billion from Hostess, a company that has seen some struggles in recent years.
The nearly century-old company began selling off parts of its business, including its Little Debbie and Wonder lines, when it filed for bankruptcy in 2012 – its second time since filing for bankruptcy in 2004.
It was then passed between various companies before returning to the stock market through a special purpose acquisition company merger in 2016.
In recent years, Hostess has been able to steadily grow revenues, as it has balanced out rising costs from supply chain issues by raising its prices to consumers. Smucker’s has also fared well with customers this way, even as many consumers rethink how they’re shopping during a time of economic confusion.