JM Smucker snaps up Twinkies owner in $5bn deal

Bengaluru/New York — JM Smucker said on Monday it will buy Twinkies-maker Hostess Brands in a $5.6bn deal, as major US packaged food companies look to expand their brand portfolios with pandemic-era fortunes dwindling.

On Sunday, sources familiar with the matter said the company was nearing a deal to buy Hostess for close to $5bn, excluding the latter’s net debt of about $900m.

Shares of Hostess were up 16.3% in premarket trading on Monday, while JM Smucker’s stock was down 7.5%.

Hostess has a market capitalisation of about $3.73bn, according to LSEG data, after a nearly 27% jump in its stock since August 25, when it was reported that it was exploring a sale after fielding takeover interest from major food makers.

JM 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 $4.55bn, according to a calculation by Reuters.

Hostess Brands became an acquisition target after it managed to boost its revenue through price hikes that fuelled investors’ concerns over its prospects as its volume growth declined.

It was then reported that General Mills, Mondelez International, PepsiCo and Hershey were among companies that had shown an interest in buying Hostess.

In recent months, the US packaged food industry has seen an uptick in mergers after major companies have started to witness the benefits of price hikes taper off.

The JM Smucker and Hostess deal follows several other deals including that of Campbell Soup’s $2.7bn deal for Rao’s saucemaker Sovos Brands and Unilever buying premium frozen yoghurt brand Yasso in North America.

Based in Lenexa, Kansas, Hostess was founded in 1930 and is behind several iconic household brands, including Twinkies and Ding Dongs.

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.

JM Smucker, which also houses coffee and pet food brands, has a market value of more than $14bn and had raised prices of its jams and jellies, which helped boost its profit forecast for the year.

Reuters