J.M. Smucker, the maker of jelly, has made a deal to acquire Twinkie owner, Hostess Brands, for $5.6 billion. This amounts to $34.25 per share.
Under the terms of the agreement, Hostess shareholders will receive $30 in cash and .03002 shares of Smucker’s stock for each share of Hostess they own. Smucker has also agreed to take on Hostess’ debt of around $900 million. The acquisition is expected to be completed in Smucker’s third fiscal quarter, which ends in January.
This purchase by Smucker is the latest in a series of deals made by major food companies in search of growth as the Covid pandemic fades. Campbell’s Soup recently announced its acquisition of Sovos Brands, the owner of Rao’s pasta sauce, for $2.7 billion. In July, Mars, the owner of M&M’s, acquired Kevin’s Natural Foods. And in June, Unilever acquired frozen yogurt brand Yasso.
News of the acquisition caused Hostess’ stock to rise by 18% in premarket trading on Monday, while Smucker’s stock fell by 7.5%.
As of the close of trading on Friday, Hostess’ stock had risen by 25% this year, giving the company a market value of $3.73 billion. The stock had already received a boost in late August after Reuters reported that the company was considering a sale following interest from large food companies, including PepsiCo and Mondelez International.
Hostess experienced a decline in demand for its Twinkies and Ding Dongs after increasing prices to offset rising commodity costs. This sparked concern among investors and attracted takeover interest from larger competitors. The company anticipates a decline in volume for the full year and has decided to pause price hikes.
This acquisition by Smucker brings an end to Hostess’ seven-year run as an independent, publicly traded company. Hostess went public in 2016 through a merger with a special purpose acquisition company.
In 2013, Apollo Global Management and Metropoulos & Co. revived the company, putting an end to a months-long Twinkie shortage, following the acquisition of assets from the company previously known as Interstate Bakeries.
