The J. M. Smucker Company to Acquire Big Heart Pet Brands, a Leader in Premium-Quality, Branded Pet Food and Pet Snacks
Big Heart Pet Brands is the largest stand-alone producer, distributor, and marketer of premium-quality, branded pet food and pet snacks in the United States. Its portfolio of brands includes Meow Mix®, Milk-Bone®, Kibbles 'n Bits®, 9Lives®, Natural Balance®, Pup-Peroni®, Gravy Train®, Nature's Recipe®, Canine Carry Outs®, and
Big Heart Pet Brands, with nearly 2,500 employees, is headquartered in
The acquisition provides the Company greater scale and strategic balance to its current portfolio while positioning it for continued growth. Strategic benefits are expected to include the following:
- Acquiring Big Heart Pet Brands will provide the Company with an immediate and significant presence in the
$21 billionpet food and snacks category, one of the largest and fastest growing center-of-the-store categories in the United States.
- Big Heart Pet Brands holds the number one position in pet snacks and a strong presence in the pet specialty channel, both representing key growth drivers for the overall category.
- The acquisition is consistent with the Company's strategy of owning leading food brands in attractive center-of-the-store categories, with a focus on
"The acquisition of Big Heart Pet Brands supports Our Purpose of 'helping to bring families together to share memorable meals and moments', as we recognize that pets are cherished members of the family," said
"Big Heart Pet Brands is an excellent strategic fit for our Company and the acquisition provides many compelling benefits in both the short- and long-term," added Smucker. "This combination further advances our strategy of owning leading food brands in attractive center-of-the-store categories. The pet food business will become a third platform for growth for our Company, along with our existing food and beverage businesses. This acquisition adds to the Company's portfolio of leading brands and increases our consumer presence, while enabling us to capitalize on the growth of the pet food and snacks category. We are pleased that
The addition of Big Heart Pet Brands further strengthens the Company's ability to enhance shareholder value over time. Financial highlights of the transaction include the following:
- The Company anticipates a full year net sales contribution of approximately
$2.4 billionin fiscal 2016, with an estimated annual growth rate of four to five percent over the next several years.
- The acquisition of Big Heart Pet Brands is expected to be slightly accretive to the Company's fiscal 2016 earnings per share, excluding one-time costs, after giving effect to synergies and the impact of the additional common shares that will be issued to the shareholders of Big Heart Pet Brands' holding company.
- With the recognition of additional synergies and anticipated growth in the pet food business, the Company expects its non-GAAP earnings per diluted share to increase approximately 10 percent in both fiscal years 2017 and 2018.
- The Company anticipates annual synergies of approximately
$200 millionwithin the first three full years of ownership, with approximately $40 million to $50 millionof the synergies expected to be realized in fiscal 2016.
$5.8 billiontransaction value represents a multiple of approximately 13 times the Company's estimate of Big Heart Pet Brands' fiscal 2015 adjusted EBITDA. Following synergies, the multiple is expected to be approximately nine times.
- Combined pro forma debt at closing will be approximately
$6.5 billion, which is expected to result in annual interest expense of approximately $200 million. Combined pro forma amortization expense will be approximately $225 millionannually.
Under the terms of the agreement, the Company will acquire all of the outstanding equity of Big Heart Pet Brands. The Company will issue approximately 17.9 million shares of its common stock to the shareholders of Big Heart Pet Brands' holding company and pay
The transaction includes leased corporate facilities in
The transaction is expected to close by the end of the Company's current fiscal year, which ends on
Following the closing of the transaction, the Company will have approximately 120 million common shares outstanding, of which approximately 14 percent will be owned by KKR, Vestar, Centerview, and AlpInvest. In connection with the transaction, KKR, Vestar, Centerview, and
The Company anticipates funding the non-equity portion of the acquisition through the combination of a bank term loan and long-term public bonds. While the Company's pro forma leverage ratio at the close of the transaction is expected to be approximately four times combined pro forma EBITDA, it is committed to maintaining an investment grade credit rating and will prioritize deleveraging over the next three to five years through its anticipated strong cash flow generation. The Company expects to maintain its current dividend payout ratio of 40 to 45 percent of non-GAAP earnings.
The Company will host a conference call today at
The Company has presented in this press release an estimate of Big Heart Pet Brands' adjusted EBITDA for its fiscal year ending
For more than 115 years, The
Dunkin' Donuts® brand is licensed to The
The J. M. Smucker Company Forward-Looking Statements
This press release contains forward-looking statements that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from any future results, performance, or achievements expressed or implied by those forward-looking statements. Readers should understand that the risks, uncertainties, factors, and assumptions listed and discussed in this press release, including the following important factors and assumptions, could affect the future results of the Company and could cause actual results to differ materially from those expressed in the forward-looking statements:
- the ability to obtain required financing on a timely basis and on acceptable terms;
- the ability of the Company to maintain an investment grade credit rating;
- the ability to obtain required regulatory approvals for the acquisition without unexpected delays or conditions;
- the ability to successfully integrate the acquired business in a timely and cost-effective manner and retain key suppliers, customers, and employees;
- the ability to achieve synergies and cost savings in the amounts and within the time frames currently anticipated;
- the ability of the Company to generate sufficient cash flow to meet its deleveraging objectives within the time frames currently anticipated;
- volatility of commodity markets from which raw materials are procured and the related impact on costs;
- risks associated with derivative and purchasing strategies employed by the Company to manage commodity pricing risks, including the risk that such strategies could result in significant losses and adversely impact the Company's liquidity;
- the availability of reliable transportation, which may be affected by the cost of fuel, regulations affecting the industry, labor shortages, service failures by third-party service providers, accidents, or natural disasters, on acceptable terms;
- the ability to successfully implement and realize the full benefit of price changes that are intended to ultimately fully recover costs, including the competitive, retailer, and consumer response, and the impact of the timing of the price changes on profits and cash flow in a particular period;
- the success and cost of introducing new products and the competitive response;
- the impact of food security concerns involving either the Company's or its competitors' products;
- the concentration of certain of the Company's businesses with key customers and suppliers, including single-source suppliers of certain raw materials and finished goods, and the ability to manage and maintain key relationships;
- the loss of significant customers, a substantial reduction in orders from these customers, or the bankruptcy of any such customer;
- impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets or changes in useful lives of other intangible assets;
- interest rate fluctuations;
- other factors affecting share prices and capital markets generally; and
- risks related to other factors described under "Risk Factors" in other reports and statements filed by the Company with the
Securities and Exchange Commission, including its most recent Annual Report on Form 10-K.
Readers are cautioned not to unduly rely on such forward-looking statements, which speak only as of the date made, when evaluating the information presented in this press release. The Company does not undertake any obligation to update or revise these forward-looking statements to reflect new events or circumstances.
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The J. M. Smucker Company, (330) 682-3000, Investors: Aaron Broholm, Director, Investor Relations, Media: Maribeth Burns, Vice President, Corporate Communications