Family-run Smucker cultivates a folksy image while pursuing acquisitions with an aim to dominate its markets, ranging from biscuits to evaporated milk.This will be Smucker's biggest purchase ever, and will roughly double the size of the company.
After the purchase, which Smucker will pay for with 63 million shares once P&G splits or spins off the unit to shareholders, the foodmaker will have enough cash to keep buying, executives said on a conference call with analysts and investors.
"We expect acquisitions to still contribute roughly half of our growth," said Chief Financial Officer Mark Belgya.
Chairman Timothy Smucker and President Richard Smucker, great-grandsons of founder Jerome Smucker, have built what started as an Ohio cider mill into what would be a foodmaker with annual sales of $4.7 billion.
The purchase is seen as a good one for Smucker's, which has a reputation as a brand-builder. Folger's is the top supermarket coffee brand, but supermarket coffee has been being drubbed by coffeehouse brands recently. Smucker's may do a better job than P&G of restoring some luster to a solid name.
Analyst reaction was positive. Stephens Inc. said it viewed the deal positively in view of the Smucker practice of buying up strong brands "and revitalizing them with management attention and advertising support."