Hostess Brands (TWNK) -) shares soared on Monday following confirmation that JM Smucker (SJM) -) will pay $5.6 billion in cash and shares for the maker of Twinkies snack cakes, adding to the Jif peanut butter maker's portfolio of packaged-food brands.
JM Smucker will pay $30 cash and and .03002 common share for each Hostess Brands share, the companies said. The deal values the group at $34.25 a share, a 22% premium to its Friday closing price.
The deal was unanimously approved by the boards of both companies and is expected to close in April of next year.
Hostess, which has seen its share price surge 27% since reports emerged from Reuters in August that it was exploring sale options, has a market value of around $3.7 billion. That's around a quarter of the value of JM Smucker, based on Friday's closing share prices.
The Wall Street Journal said Smucker beat out packaged-food rival General Mills (GIS) -) for Hostess, which twice filed under the bankruptcy laws.
"We are excited to announce the acquisition of Hostess Brands, which represents a compelling expansion of our family of brands and a unique opportunity to accelerate our focus on delighting consumers with convenient solutions across different meal and snacking occasions," said JM Smucker Chief Executive Mark Smucker.
Smucker: Leveraging Hostess distribution
"With this acquisition, we are adding an iconic sweet snacking platform; enhancing our ability to deliver brands consumers love and convenient solutions they desire; and leveraging the attributes Hostess Brands offers, including its strong convenience store distribution and leading innovation pipeline, combined with our strong commercial organization and consistent retail execution across channels to drive continued growth," he added.
At last check Hostess shares were 19% higher at $33.50. Smucker shares were down 6.4% at $132.55.
Hostess, first formed in 1930, returned to the capital markets in 2016 through a $725 million deal with private equity firm Gores Group. The Lenexa, Kansas-based snack group brought a renewed focus on U.S. and Canada markets, where it generates nearly all of its revenues, thanks in part to a new line of products that target younger consumers.
Last month, Hostess said revenues for the three months ended in June rose 3.5% from a year earlier to $352.4 million, missing analysts' estimates, despite a series of price increases used to absorb higher input costs.
Still, the group lifted its full-year profit target, to the higher end of its previous forecast of $315 million to $325 million, adding it's "well-positioned for attractive shareholder returns as we build a premier, pure-play snacking company."
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