J.M. Smucker will acquire Twinkie maker Hostess Brands for $5.6 billion, swallowing up the purveyor of sugary snacks that rebounded during the pandemic after twice pursuing bankruptcy.
The deal announced Monday values Hostess at $34.25 per share, which the company said represented a 54 percent premium over its stock price before news reports of a potential deal. Hostess shareholders will get $30 in cash and 0.03002 shares of J.M. Smucker stock for each share of Hostess stock.
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With this acquisition, Smucker enhances its “ability to deliver brands consumers love,” J.M. Smucker board chair Mark Smucker said in a news release. It also combines Hostess’s “strong convenience store distribution and leading innovation pipeline” with our “strong commercial organization and consistent retail execution across channels to drive continued growth.”
Both companies capitalized on Americans’ growing appetite for snacks and packaged food during the pandemic, which restricted dining-out options and forced many consumers to make more meals at home. Rivals such as General Mills, Conagra and Kellogg’s also saw their snacks, canned goods and frozen foods take off in 2020, when the coronavirus took hold. Heritage brands such as Goldfish, Oreos and Doritos also saw a resurgence as homebound consumers stocked their pantries with treats.
But analysts say the rise of powerhouse weight-loss drugs could present new head winds for such offerings.
Smucker is known for its signature jelly, Jif peanut butter and Carnation milk products. Hostess is best known for such cream-filled lunchbox confections as Ho Hos, Ding Dongs and Twinkies.
The Twinkie has became a cultural touchstone, featuring prominently in popular culture. In a well-known scene from the 1984 classic film “Ghostbusters,” one of the protagonists uses a Twinkie to explain an impending ghostly event, then takes a bite. The plot of the 2009 comedy “Zombieland” turns on a man’s obsessive quest to find Twinkies in post-apocalyptic America, employing a wrecked Hostess truck to illustrate his desperate desire to reclaim what was lost.
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But by 2013, Hostess was struggling financially amid declining sales and a bitter labor dispute, according to a 2013 write-up by the Associated Press. Hostess filed for bankruptcy in 2004 and again in 2012, at one point leading customers to hoard its snacks after it halted sales.
The holding company Hostess Brands was established in 2013 when private equity backers led by Leon Black’s Apollo Global Management acquired the rights to Twinkies and other Hostess cakes. It went public in 2016 through a special purpose acquisition company, or “reverse merger” deal, that was initially valued at $2.3 billion, according to Reuters.
Hostess and other snack brands got a boost during the pandemic as people increasingly relied on packaged goods. “Consumers are home more, they snacking more, they’re back on the go,” chief executive Andy Callahan told Yahoo Finance in May 2022, shortly after the company logged a 25 percent revenue increase while hiking snack prices.
Its revenue and profit held up in the most recent quarter but didn’t produce the sort of dazzling results that wowed investors in 2020 and 2021. In financial statements reported Aug. 8, it logged $352.4 million in net revenue for the second quarter, reflecting a 3.5 percent increase from the previous year. Its guidance factors in net revenue growth of 4 to 6 percent for the year.
Numerous food companies have consolidated in the first half of the year. Last month, Campbell Soup struck a $2.7 billion deal for Rao’s sauce maker Sovos Brands, and Unilever bought frozen yogurt maker Yasso. Mars, best known for its candy, added the nutrition-focused meal company Kevin’s Natural Foods to a portfolio that also includes pet-care products.
Analysts believe the industry could face new pressure due to the rise of new weight-loss drugs that reduce appetite and caloric intake. Morgan Stanley investment bank suggested there could be broad-based reductions in calorie intake of up to 3 percent for certain snacks as a result, suggesting food companies with “better-for-you” food options will be best positioned for growth.
Hostess shares soared 19 percent Monday, while J.M. Smucker slid 7 percent.
The deal announced Monday values Hostess at $34.25 per share, which the company said represented a 54 percent premium over its stock price before news reports of a potential deal. Hostess shareholders will get $30 in cash and 0.03002 shares of J.M. Smucker stock for each share of Hostess stock.
Get a curated selection of 10 of our best stories in your inbox every weekend.
With this acquisition, Smucker enhances its “ability to deliver brands consumers love,” J.M. Smucker board chair Mark Smucker said in a news release. It also combines Hostess’s “strong convenience store distribution and leading innovation pipeline” with our “strong commercial organization and consistent retail execution across channels to drive continued growth.”
Both companies capitalized on Americans’ growing appetite for snacks and packaged food during the pandemic, which restricted dining-out options and forced many consumers to make more meals at home. Rivals such as General Mills, Conagra and Kellogg’s also saw their snacks, canned goods and frozen foods take off in 2020, when the coronavirus took hold. Heritage brands such as Goldfish, Oreos and Doritos also saw a resurgence as homebound consumers stocked their pantries with treats.
But analysts say the rise of powerhouse weight-loss drugs could present new head winds for such offerings.
Smucker is known for its signature jelly, Jif peanut butter and Carnation milk products. Hostess is best known for such cream-filled lunchbox confections as Ho Hos, Ding Dongs and Twinkies.
The Twinkie has became a cultural touchstone, featuring prominently in popular culture. In a well-known scene from the 1984 classic film “Ghostbusters,” one of the protagonists uses a Twinkie to explain an impending ghostly event, then takes a bite. The plot of the 2009 comedy “Zombieland” turns on a man’s obsessive quest to find Twinkies in post-apocalyptic America, employing a wrecked Hostess truck to illustrate his desperate desire to reclaim what was lost.
ADVERTISING
But by 2013, Hostess was struggling financially amid declining sales and a bitter labor dispute, according to a 2013 write-up by the Associated Press. Hostess filed for bankruptcy in 2004 and again in 2012, at one point leading customers to hoard its snacks after it halted sales.
The holding company Hostess Brands was established in 2013 when private equity backers led by Leon Black’s Apollo Global Management acquired the rights to Twinkies and other Hostess cakes. It went public in 2016 through a special purpose acquisition company, or “reverse merger” deal, that was initially valued at $2.3 billion, according to Reuters.
Hostess and other snack brands got a boost during the pandemic as people increasingly relied on packaged goods. “Consumers are home more, they snacking more, they’re back on the go,” chief executive Andy Callahan told Yahoo Finance in May 2022, shortly after the company logged a 25 percent revenue increase while hiking snack prices.
Its revenue and profit held up in the most recent quarter but didn’t produce the sort of dazzling results that wowed investors in 2020 and 2021. In financial statements reported Aug. 8, it logged $352.4 million in net revenue for the second quarter, reflecting a 3.5 percent increase from the previous year. Its guidance factors in net revenue growth of 4 to 6 percent for the year.
Numerous food companies have consolidated in the first half of the year. Last month, Campbell Soup struck a $2.7 billion deal for Rao’s sauce maker Sovos Brands, and Unilever bought frozen yogurt maker Yasso. Mars, best known for its candy, added the nutrition-focused meal company Kevin’s Natural Foods to a portfolio that also includes pet-care products.
Analysts believe the industry could face new pressure due to the rise of new weight-loss drugs that reduce appetite and caloric intake. Morgan Stanley investment bank suggested there could be broad-based reductions in calorie intake of up to 3 percent for certain snacks as a result, suggesting food companies with “better-for-you” food options will be best positioned for growth.
Hostess shares soared 19 percent Monday, while J.M. Smucker slid 7 percent.
