JM Smucker, a company known for producing jelly, is in the process of purchasing Hostess Brands, the maker of Twinkies, for a total of $5.6 billion or $34.25 per share.
In a report by CNBC, the stockholders of Hostess will each get $30 in cash and .03002 of a share of Smucker's stock in exchange for each share of Hostess equity that they previously held. Smucker has also agreed to take on around $900 million worth of Hostess' debt in the process of acquiring the company.
It is anticipated that the transaction will be finalized during Smucker's fiscal third quarter, which will come to a finish in the month of January 2024.
Smucker-Hostess Merger
Newly arrived Hostess Twinkie snack cakes are for sale in a Wal-Mart store in West Covina, California, on July 14, 2013.
The seven-year run that Hostess had as an independent, publicly listed corporation comes to an end with the sale of the firm to Smucker. In 2016, Hostess became a publicly traded corporation after completing a merger with a firm that specializes in acquisitions for specific purposes.
After just three years, Apollo Global Management and Metropoulos & Co. brought the firm back from the brink of extinction, putting an end to a shortage of Twinkies that had persisted for many months. This was accomplished by purchasing the assets of the company that was once known as Interstate Bakeries.
The acquisition of Smucker is only the most recent in a series of mergers and acquisitions by Big Food, which is seeking expansion as the profits from the Covid pandemic diminish.
Campbell Soup Company has recently made public its intention to acquire Sovos Bands, the company that owns Rao's pasta sauce, for a total price of $2.7 billion. Mars, the parent company of M&M's, completed the purchase of Kevin's Natural Foods in July. Also, in June, Unilever completed the acquisition of the Yasso brand of frozen yogurt.
Also Read: Sandwich Franchise Subway Acquired by Private Equity Company Roark Capital for $9.55 Billion
Surge in Stocks
On Monday morning, September 11, before the opening of the market, shares of Hostess saw a rise of 18% as a result of the news. Meanwhile, there was a 7.5% decrease in the price of Smucker's shares.
CNBC said shares of Hostess have increased by 25% so far this year, which has resulted in the company's market worth increasing to $3.73 billion as of the conclusion of business on Friday, September 8. But the company's shares had already gotten a substantial push when Reuters reported in late August that it was exploring a sale after getting interest from huge food businesses such as PepsiCo and Mondelez International, which makes Oreos.
After increasing pricing to offset rising commodity costs, Hostess noticed a decrease in demand for its Twinkies and Ding Dongs. This caused investors to become concerned and bigger competitors to express interest in taking Hostess over.
The firm anticipates that there will be a decrease in volume for the whole of the year. The executives decided to put a hold on any further price increases.
