Orreville, Ohio-based J.M. Smucker made a $2.95 billion bid for more of the breakfast table Wednesday, announcing all-stock deal for Procter & Gamble Co.’s Folgers coffee, expected to close in the fourth quarter reports MSNBC.com.
Smucker will issue a special $5 dividend to Smucker shareholders before the acquisition, P&G shareholders will receive about 53.5 percent of Smucker in a tax-free stock-for-stock acquisition after the dividend, and the jam and jelly maker will assume some $350 million of Folger’s debt.
“Coffee is the perfect compliment to breakfast or dessert — two areas we know a lot about,” says Richard Smucker, president and co-chief executive. “We are excited about the addition of Folgers and the many dimensions this transaction brings.”
P&G and Smucker concluded a similar deal in 2002, when Smucker bought the Jif peanut butter and Crisco shortening brands from P&G in an all-stock deal valued at nearly $1 billion.
Although Folgers is the nation’s No. 1 ground coffee brand and among P&G’s “billion-dollar brands” in annual sales, it faces increased competition from Starbucks and other coffee brands. P&G said earlier this year it wants to focus on its core businesses by exiting certain categories. Smucker, meanwhile, expects the brand will boost its profits by 9 percent and expects sales to increase to about $4.7 billion.
It's a win-win for both companies.
