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Hostess Brands Acquired by J.M. Smucker Co.

We don’t only cover food news, but we also can’t help that space is hot right now.

Earlier this month, Twinkies maker Hostess Brands (“Hostess”) announced that snack giant J.M. Smucker (“Smucker”) was going to acquire the Company for an equity value of ~$4.6 billion.

The offer, comprised of both cash and stock, represents a premium of ~54% to the share price immediately prior to Hostess announcing its sale. Smucker offered a value of ~$34.25/share to Hostess shareholders, with the stock currently trading at $33.38/share.

The consideration is structured as $30/share plus 0.03002 Smucker shares per Hostess share. The cash portion of the purchase price is expected to be funded by cash on hand and various tranches of debt, including a bank term loan and publicly traded bonds.

According to Smucker, this deal represents ~17.2x TEV/2023E EBITDA, which is by no means cheap. The most recent comp is Campbell’s Soup’s acquisition of Rao’s Sauce in Aug ‘23, which was acquired at TEV/2023E EBITDA multiple of ~19.8x (excluding synergies).

Smucker’s shareholders have let their opinion be known, with the stock down materially since the announcement.

Both of the Boards of Directors have unanimously approved the acquisition; however, analysts are not bullish on the news. In particular, JP Morgan highlighted that this price is remarkably high and are shocked that anyone would pay it in this market.

A bit of history: Hostess saw its public debut in 2016, following its 2013 acquisition by PE giant, Apollo. Apollo played a pivotal role in Hostess' resurgence after its Chapter 11 bankruptcy stint and has since majorly liquidated its stake in the company.

_{NEWS ROUNDUP}

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Total Capital Raise vs. First Time Fund Share

US PE Firms have continued to raise consistent levels of capital but it has become significantly harder for first time funds to raise capital, with their share dropping to their lowest levels since 2008 at 13%.