September 21, 2023 | Consumer Discretionary | North America | Ended
JM Smucker has agreed to acquire snack maker Hostess Brands – the company behind Twinkies, HoHos and other pastry snacks – in a cash and stock offer worth $5.6bn. Under the terms of the deal, announced on 11-Sep-23, Smucker will offer Hostess shareholders $30 in cash and 0.03002 SJM US, worth $34.25 per share at announcement, implying a 54% premium to Hostess’ undisturbed share price on 24-Aug-23, before the media speculated about a potential transaction. On 25-Aug-23, Reuters reported that Hostess was exploring a sale and that companies including PepsiCo (PEP US) and Mondelez International (MDLZ US) expressed interest. The rumours caused Hostess’ share price to initially rise 21.7%, and upon the announcement, shares surged a further 19.1%. Conversely, Smucker shares dropped -7.0% as investors viewed the consideration as too expensive. Both companies’ boards unanimously support the deal, and they expect the transaction to close during Smucker’s fiscal 3Q’24 which spans 1-Nov-24 through 31-Jan-24; we assume 30-Nov-23 settlement. The deal is structured as a tender offer subject to a 50% minimum acceptance condition for Hostess shareholders and a vote on the Smucker side is not required. Other conditions to closing include antitrust approvals from the US and Canada, and requisite filings are expected within 10 business days (by 22-Sep-23). Hostess is subject to a non-solicitation clause with a fiduciary-out, and Smucker will ...
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