In a deal that joins two significant American snack manufacturers, J.M. Smucker (SJM.N) and Hostess Brands (TWNK.O), the creator of Twinkies, will be acquired for $5.6 billion, including debt.
Without debt, the transaction was valued around $4.6 billion, and Smucker, the manufacturer of Jif peanut butter, paid Hostess stockholders $34.25 per share. Since the day Reuters revealed that the business was considering a sale, the cash-and-stock offer reflects an increase in value of 54% on the shares.
In early trading on Monday, Hostess shares were up 19% at $33.49 after a news about the selling process, while Smucker’s shares were down 7% as the transaction was perceived by investors to be excessively pricey.
According to Smucker, the purchase represents adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of nearly 17.2 times based on its forecast of Hostess Brands’ 2023 performance and is anticipated to conclude in the third quarter of its current fiscal year.
Sovos Brands (SOVO.O), the creator of Rao’s sauce, was recently acquired by Campbell Soup (CPB.N), representing an adjusted EBITDA multiple of 14.6 times with run rate savings and 19.8 times without them. According to LSEG statistics, the average predicted 12-month EBITDA for the food and tobacco sector is presently 14.4.
“From SJM’s standpoint, we can’t claim that we adore this deal. First off, the cost is excessive; we are shocked that SJM (or anybody else) is shelling out this much, said JPMorgan analysts in a note on Monday.
