J.M. Smucker Acquires Twinkies Maker Hostess Brands for $5.6 Billion

J.M. Smucker acquires iconic Twinkies maker Hostess Brands in a monumental $5.6 billion deal, merging two major American snack titans and reshaping the landscape of the U.S. packaged food industry.

The purchase price, which doesn't include debt, is approximately $4.6 billion. Smucker, known for its popular Jif peanut butter, will compensate Hostess shareholders $34.25 per share in a cash-and-stock offer. This represents a premium of 54% on the stock since Reuters first reported Hostess Brands' exploration of a potential sale.

Since news of the sale process broke, shares of Hostess have surged by 27%, currently trading at $33.49 in early Monday trading. Meanwhile, Smucker's shares have declined by 7% as some investors view the deal overly expensive.

Smucker expects the transaction to conclude during the third quarter of its current fiscal year. Based on the estimated 2023 results of Hostess Brands, the deal represents adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately 17.2 times.

This strategic move by Smucker aligns with the broader trend of major U.S. packaged food companies expanding their brand portfolios amid shifting market dynamics brought on by the pandemic.

With dwindling pandemic-era fortunes, companies within the U.S. packaged food industry have witnessed an increase in mergers. Faced with fading benefits from price hikes, many market players seek to improve volumes by rebranding their portfolios.

Hostess Brands became an attractive acquisition target after implementing successful price hikes that boosted revenue. However, concerns arose over the long-term growth potential as the company experienced consistent declines in volume.

The union between Smucker and Hostess follows a series of other sector deals. It includes Campbell Soup's $2.7 billion acquisition of Sovos Brands and Unilever's purchase of North American premium frozen yogurt brand Yasso.

Hostess, headquartered in Lenexa, Kansas, boasts a rich history dating back to its founding in 1930. The company is responsible for household favorites such as Ho-Hos, Ding Dongs, Zingers, and Voortman cookies and wafers.

Through an extensive portfolio revamp, Hostess successfully generated over $1 billion in revenue by the end of 2020. Despite sales volume weakening, timely price adjustments have helped the company maintain its revenue growth trajectory.

Photo: Business Wire