Prepare for a meeting of two very different yet prolific giants. In a bid to streamline and finance convenient food options, The J.M. Smucker Company, known colloquially as Smuckers, has bought Hostess Brands.
“We believe this is the right partnership to accelerate growth and create meaningful value for consumers, customers and shareholders,” said president and CEO of Hostess Brands Andy Callahan. “Our companies share highly complementary go-to market strategies, and we are very similar in our core business principles and operations.”
Smuckers has bought Hostess Brands in a multi-billion dollar deal
Smuckers paid $5.6 billion, which includes debt, to acquire Hostess Brands. Shareholders were paid $34.25 per share, according to ABC7. This particular brand of unions was chosen because it is consistent with the Smuckers “focus on convenient consumer occasions” and growing the “family of brands consumers love,” according to a statement.
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Hostess is most famous for Twinkies, HoHos, Ding Dongs, and Donettes; in the past, it also owned Wonder Bread, Dolly Madison, and Nature’s Pride. Meanwhile, Smuckers distributes Uncrustables, Jif peanut butter, and Dunkin’ coffee products. Hostess used to be known as Interstate Bakeries and Old HB and dates back to 1930. However, over the years, it has gradually sold off branches of its expansive business. This merger is designed to financially benefit both convenience food giants.
Financial flourishing and fallout
Results in the immediate aftermath have been mixed since Smuckers announced plans to buy Hostess on September 22. Some investors with Smuckers worried that the purchase was too costly and the stock went down 7%. However, there was also a surge of 19% early that Monday.
Despite the mixed response from investors, Smuckers has high hopes for this deal. it expects costs to go down by $100 million within two years, while generating $1.5 billion in annual sales from Hostess. Hostess has had its share of financial troubles in the past, filing for bankruptcy in 2004 and 2012. Both companies, however, have managed to correct course by offsetting supply chain costs to bring in profit with increased consumer costs.
It should be noted that though the deal was announced, it is not expected to close until the third quarter of a typical Smuckers fiscal year, which is April 30. What is your favorite treat from either company and what do you think this will do for both?
