ORRVILLE, Ohio, April 4, 2018 /PRNewswire/ --
- Reflects continued execution of the Company's strategic
roadmap, including prioritization of key growth categories
- Ainsworth acquisition strengthens current pet food portfolio
with addition of high-growth, on-trend brand
- Acquisition significantly expands presence in fast-growing
premium pet food category
- Annual cost synergies of $55
million expected within first three years after
acquisition
The J. M. Smucker Company (NYSE: SJM) ("Company") announced
today the signing of a definitive agreement to acquire Ainsworth
Pet Nutrition, LLC ("Ainsworth") in a transaction valued at
approximately $1.7 billion, after an
estimated tax benefit of $200
million. The Company also announced today it will
explore strategic options for its U.S. baking business, including a
potential sale.
Proposed Acquisition of Ainsworth Pet Nutrition, LLC
Ainsworth is a leading producer, distributor, and marketer of
premium pet food and pet snacks, predominately within the United
States. Approximately two-thirds of Ainsworth's sales are
generated by its Rachael Ray™ Nutrish® brand
("Nutrish"), which is driving significant growth in the premium pet
food category. Ainsworth also sells pet food and pet snacks
under several additional branded and private label trademarks.
Strategic Rationale
Benefits of the transaction are
expected to include the following:
- Pet food and pet snacks has become the largest
center-of-the-store category in the U.S. Food and Beverage market,
generating over $30 billion in annual
retail sales across all channels, and remains one of the
fastest-growing categories. This acquisition and the addition
of the high-growth Nutrish brand will increase the scale and
further accelerate the growth profile of the Company's pet food
business.
- Nutrish holds a leading position and is one of the
fastest-growing brands in the premium dry dog food segment within
the grocery and mass channels, a key growth driver for the overall
category. The addition of Nutrish to the Company's portfolio
will significantly expand the Company's presence in this area,
complementing the Company's Nature's
Recipe® brand.
- The transaction further strengthens the Company's position in
dog snacks with the presence of Nutrish in fast-growth segments,
including natural meats and long-lasting chews.
- While Nutrish has a relatively smaller presence in premium cat
food, the brand is well-positioned for significant growth in this
segment. This will help accelerate opportunities in the
Company's current pet food portfolio.
Executive Comments
"Ainsworth Pet Nutrition is an
excellent strategic fit for our Company, as the Rachael
RayTM Nutrish® brand adds another
high-growth, on-trend brand to our pet food portfolio," said
Mark Smucker, Chief Executive
Officer. "Their team has done a tremendous job growing this
business, building Nutrish into one of the most recognizable
premium pet food brands in the United States. We look forward
to working with the talented Ainsworth team, as we know their
passion for pets runs as deep as ours."
"Smucker's decision to acquire Ainsworth Pet Nutrition validates
the power of the Ainsworth company mission," said Jeff Watters, President & CEO of
Ainsworth. "At Ainsworth, our goal has been to improve the
lives of pet families everywhere by making high quality pet food
accessible to all pet parents. This single-minded focus has
resonated with consumers and will continue to resonate under
Smucker leadership."
"After five generations, our family, in partnership with L
Catterton, made the decision to sell Ainsworth Pet Nutrition to The
J. M. Smucker Company," said Sean
Lang, Executive Chairman of Ainsworth. "We took great
care to find the right home for our brands and our people, to whom
we are so grateful. The J. M. Smucker Company, also a
fifth-generation family company, is led by a like-minded family to
our own. We expect the combined horsepower of these pet care
organizations to achieve great things."
"It has been an important goal of mine to help create pet food
with the same care I use when creating my recipes, as well as a
brand that has been able to donate over $27
million to help animals in need," said Rachael Ray.
"So I am pleased that The J. M. Smucker Company is committed not
only to maintaining the high quality of the Nutrish brand, but
continuing the philanthropic efforts of the brand through donations
to The Rachael Ray Foundation, which helps those animals that are
less fortunate than our own."
Financial Impact
The Company anticipates the acquired
business to contribute net sales of approximately $800 million in the first full year after closing
the transaction.
Annual cost synergies of approximately $55 million are expected to be fully realized
within three years after closing, with approximately $25 million anticipated in the first year.
After giving effect to the first year of synergies, the Company
expects the acquired business to generate earnings before interest,
taxes, depreciation, and amortization ("EBITDA") of approximately
$110 million in the first full year
after closing the transaction, excluding one-time costs, and
contribute approximately $0.25 of
accretion to the Company's adjusted earnings per share.
Transaction Details
The all-cash transaction, which
the Company will fund with debt, is valued at $1.9 billion, prior to an expected tax benefit
related to the acquisition with a present value of approximately
$200 million. After factoring
in the estimated tax benefit and anticipated annual cost synergies
of $55 million, the purchase price
represents a multiple of approximately 12 times EBITDA.
Ainsworth is a privately-held company headquartered in
Meadville, Pennsylvania. In
addition to its headquarters, the transaction includes two
manufacturing facilities owned by Ainsworth, which are located in
Meadville, Pennsylvania and
Frontenac, Kansas, and a leased
distribution facility in Greenville,
Pennsylvania. The Company anticipates that over 700
Ainsworth employees will join the Company in conjunction with the
transaction. Ainsworth operates two additional manufacturing
facilities that are primarily used to provide contract
manufacturing services to third-party pet food distributors.
Those facilities and the associated business are not included in
this transaction.
The Company expects to incur approximately $50 million in one-time costs related to the
acquisition, the majority of which are expected to be cash
charges. Approximately two-thirds of the one-time costs are
expected to be recognized in the first year after the closing of
the transaction.
The transaction is expected to close early in the Company's
fiscal year beginning May 1, 2018,
subject to customary closing conditions including receipt of
required regulatory approvals.
Bank of America Merrill Lynch provided committed financing for
the Ainsworth transaction.
Strategic Review of the Company's U.S. Baking
Business
The Company is reviewing strategic
options, including a potential divestiture, for its U.S. baking
business that primarily encompasses products sold in U.S. retail
channels under the Pillsbury®, Martha White®, Hungry
Jack®, White Lily®, and
Jim Dandy® brands,
along with all relevant trademarks and licensing agreements, and
the Company's manufacturing facility in Toledo, Ohio. The Company holds a
20-year, perpetually renewable, royalty-free license for the use of
the Pillsbury® brand name and related trademarks,
which is transferable at the Company's discretion. The
Company's baking business in Canada, which consists of products primarily
sold under the Carnation®, Eagle
Brand®, Five Roses®,
Golden Temple®,
and Robin Hood®
brands, is excluded from this review.
The Company's U.S. baking brands are expected to generate net
sales of approximately $370 million
for the Company's fiscal year ending April 30, 2018, and are primarily
reported in the Company's U.S. Retail Consumer Foods segment.
The review is expected to be completed by the end of the first
quarter of the Company's 2019 fiscal year.
"We regularly review our portfolio to ensure it aligns with our
strategic priorities," said Mark
Smucker. "Pillsbury®, Hungry
Jack®, and Martha
White® remain iconic brands, and this
well-run business has been a solid contributor to our financial
performance over the years. However, our current strategic
priorities include an increased emphasis and allocation of
resources toward growing our coffee, pet, and snacking food
businesses."
There can be no assurance that the Company's exploration of
strategic options will result in any transaction or other action by
the Company, or the timing thereof. The Company does not
intend to comment on or provide updates regarding these matters
unless and until it determines that further disclosure is
appropriate or required based on then-current facts and
circumstances.
The J. M. Smucker Company Forward-Looking
Statements
This press release contains forward-looking
statements, such as projected net sales, operating results,
earnings, and cash flows that are subject to risks and
uncertainties that could cause actual results to differ materially
from future results expressed or implied by those forward-looking
statements. The risks, uncertainties, important factors, and
assumptions listed and discussed in this press release, which could
cause actual results to differ materially from those expressed,
include: the ability of the parties to satisfy closing conditions
for the Ainsworth transaction, including receipt of required
regulatory approvals, without unexpected delays or conditions; the
ability to successfully integrate the acquired Ainsworth business
in a timely and cost-effective manner; the ability to achieve cost
efficiencies in the amounts and within the time frames currently
anticipated and to effectively manage the related one-time costs;
the ability of the Company to successfully complete a potential
divestiture of its U.S. baking business in a timely and
cost-effective manner; the ability to obtain required financing on
a timely basis and on acceptable terms; the ability to maintain an
investment grade credit rating; the ability to generate sufficient
cash flow to meet deleveraging objectives; volatility of commodity,
energy, and other input costs; risks associated with derivative and
purchasing strategies employed to manage commodity pricing risks;
the ability to implement and realize the full benefit of price
changes that are intended to ultimately fully recover costs;
general competitive activity in the market, including competitors'
pricing practices and promotional spending levels; the loss of
significant customers, a substantial reduction in orders from these
customers, or the bankruptcy of any such customer; impairments in
the carrying value of goodwill, other intangible assets, or other
long-lived assets or changes in useful lives of other intangible
assets; and risks related to other factors described under "Risk
Factors" in other reports and statements filed with the Securities
and Exchange Commission, including the Company's most recent Annual
Report on Form 10-K. The Company undertakes no obligation to
update or revise these forward-looking statements, which speak only
as of the date made, to reflect new events or circumstances.
About The J. M. Smucker Company
For 120 years, The J.
M. Smucker Company has been committed to offering consumers quality
products that bring families together to share memorable meals and
moments. Today, Smucker is a leading marketer and manufacturer of
consumer food and beverage products and pet food and pet snacks in
North America. In consumer foods
and beverages, its brands include Smucker's®,
Folgers®, Jif®, Dunkin'
Donuts®, Crisco®,
Pillsbury®, R.W. Knudsen
Family®, Hungry Jack®, Café
Bustelo®, Martha
White®, truRoots®,
Sahale Snacks®, Robin
Hood®, and Bick's®. In pet
food and pet snacks, its brands include Meow Mix®,
Milk-Bone®, Kibbles 'n Bits®, Natural
Balance®, and 9Lives®. The Company
remains rooted in the Basic Beliefs of Quality, People,
Ethics, Growth, and Independence established by its
founder and namesake more than a century ago. For more information
about the Company, visit jmsmucker.com.
The J. M. Smucker Company is the owner of all trademarks
referenced herein, except for the following, which are used under
license: Pillsbury® is a trademark of The
Pillsbury Company, LLC, and Dunkin' Donuts® is a
registered trademark of DD IP Holder LLC.
Dunkin' Donuts® brand is licensed to The J. M.
Smucker Company for packaged coffee products sold in retail
channels such as grocery stores, mass merchandisers, club stores,
and drug stores. This information does not pertain to
Dunkin' Donuts® coffee or other products for sale
in Dunkin' Donuts® restaurants.
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