Smuckers gobbles up Twinkie owner Hostess in $5.6B snack food takeover

Food conglomerate J.M. Smucker said on Monday it will buy Twinkies-maker Hostess Brands in a $5.6 billion deal, as major U.S. packaged food companies look to expand their brand portfolios with pandemic-era fortunes dwindling.

In recent months, the U.S. packaged food industry has seen an uptick in mergers as most of the companies seek to improve volumes by rebranding portfolios after benefits from price hikes started wavering.

The equity value of the deal stood at $4.55 billion, as per Reuters calculations, with Smuckers — the owner of 40 brands including Jif peanut butter, Folger’s coffee and Robin Hood flour — Hostess shareholders $34.25 per share.

The cash-and-stock offer represents a premium of 54 per cent on the stock since the day Reuters reported the company was exploring a sale.

Shares of Hostess have since surged 27 per cent and were up 19 per cent at $33.49 in premarket trading on Monday, while those of J.M. Smucker’s were down 7 per cent.

Hostess Brands became an acquisition target after its price hikes boosted revenue but fuelled investor concerns over its prospects with its volume growth consistently declining.

The J.M. Smucker and Hostess deal follows a spree of other deals including Campbell Soup’s $2.7 billion deal for Rao’s sauce maker Sovos Brands and Unilever’s purchase of premium frozen yogurt brand Yasso in North America.

J. M. Smucker said the deal is expected to close in the third quarter of its current fiscal year and represents an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of about 17.2 times based on its estimate of Hostess Brands 2023 results.

Campbell Soup’s acquisition of Sovos Brands represented an adjusted EBITDA multiple of 14.6 times, including run rate savings, and 19.8 times excluding those. The food and tobacco sector currently trades at 14.4 projected 12-month EBITDA on average, according to LSEG data.

Based in Lenexa, Kansas, Hostess was founded in 1930 and is behind several iconic household brands, including Ho-Hos, Ding Dongs, Zingers, and Voortman cookies and wafers.

J.M. Smucker has a market valuation of over $14 billion US and had raised prices of its jams and jellies, which helped boost its profit forecast for the year.