In a sugary union of major snack makers, J.M. Smucker, known for its jellies, Jif peanut butter and many other brands, agreed to acquire Hostess Brands, the maker of Twinkies, Ho Hos and Ding Dongs, in a deal worth $5.6 billion.
The takeover, announced on Monday, values Hostess at $34.25 per share, about 50 percent higher than its stock was trading before takeover rumors emerged a few weeks ago. Smucker’s stock fell 7 percent on Monday. The cash-and-stock deal, which includes Smucker’s taking on Hostess’s $900 million in debt, is expected to close by the end of April, the companies said.
Mark Smucker, the chief executive of J.M. Smucker and the great-great-grandson of Jerome Monroe Smucker, the company’s founder, said the deal would add “an iconic sweet snacking platform” to the group’s portfolio. In addition to snacks, the company’s stable includes many coffee and pet food brands, like Folgers and Milk-Bone.
Analysts at JPMorgan Chase described the takeover as more of a win for Hostess than for Smucker, given the hefty price. They also raised questions about how the companies’ brands would blend since Smucker does not own many shelf-stable snacks, as Hostess does.
“Some may argue that there are revenue synergies from marketing coffee and breakfast snacks together,” the analysts wrote in a note after the deal was announced. “Maybe, but lots of foods and beverages are consumed at the same time; they don’t always naturally benefit from being owned by the same producer.”
Smucker said it expected to cut $100 million worth of costs at the combined group within two years.
Hostess traces its roots to the early 20th century, when it was at the forefront of innovations like sliced bread. More recently, the company filed for bankruptcy twice, in 2004 and 2012. The company passed between various investment firms and went public in 2016 via a merger with a special purpose acquisition company.
Hostess and Smucker are among the consumer brands that have recently been able to increase sales and profits by raising prices as fast as, or faster than, their costs, which were pushed up by supply-chain snarls early in the pandemic and higher energy prices after Russia’s invasion of Ukraine. Food prices have risen at a faster rate than overall inflation over the past year, squeezing shoppers’ budgets. Last quarter, Hostess raised prices by 10 percent from a year earlier and Smucker by 8 percent.