Smucker to Acquire Big Heart Pet Brands for $5.8B
The J. M. Smucker Company announces it has entered into a definitive agreement to acquire Big Heart Pet Brands in a cash and stock transaction valued at approximately $5.8 billion, which includes approximately $2.6 billion of net debt.
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 Milo's Kitchen. The company estimates Big Heart Pet Brands' net sales will be approximately $2.3 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will be approximately $450 million for Big Heart Pet Brands' fiscal year ending May 3, 2015.
Big Heart Pet Brands, with nearly 2,500 employees, is headquartered in San Francisco, Calif. The company is currently owned by a consortium of investors led by funds affiliated with Kohlberg Kravis Roberts & Co. L.P. (KKR), Vestar Capital Partners (Vestar), Centerview Capital (Centerview), and AlpInvest Partners Inc. (AlpInvest). The company changed its name from Del Monte Corporation to Big Heart Pet Brands following the sale of its fruit, vegetable, and other consumer foods portfolio on February 18, 2014.
The acquisition is expected to provide 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 billion pet 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 North America.
?"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," says Richard Smucker, chief executive officer. "With approximately two-thirds of U.S. households having at least one family pet, we will now be able to serve the mealtime and snacking needs of the whole family. We look forward to working with Big Heart Pet Brands' experienced and talented team to leverage our combined capabilities and scale, while further enhancing value for all our constituents."
"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," adds 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 Dave West will be joining our company to lead the pet food business as part of our talented management team and we look forward to his contributions."
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 $1.3 billion in cash, subject to adjustment for working capital and certain other amounts. The company will also assume approximately $2.6 billion of net debt of Big Heart Pet Brands, which will be refinanced by the company upon closing.
The transaction includes leased corporate facilities in San Francisco, California; Pittsburgh, Pennsylvania; and Burbank, California; and owned or leased manufacturing facilities in Decatur, Alabama; Topeka, Kansas; Lawrence, Kansas; Buffalo, New York; and Bloomsburg, Pennsylvania; as well as several research and development facilities, sales offices, and distribution centers.
The transaction is expected to close by the end of the company's current fiscal year, which ends on April 30, 2015, subject to customary closing conditions including receipt of required regulatory approvals. The company expects to incur approximately $225 million in one-time costs related to the transaction, of which approximately $150 million are expected to be cash charges. One-time costs are anticipated to be incurred primarily over the next three fiscal years, with approximately one-half of the costs expected to be recognized in fiscal 2016.
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 Milo's Kitchen. The company estimates Big Heart Pet Brands' net sales will be approximately $2.3 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will be approximately $450 million for Big Heart Pet Brands' fiscal year ending May 3, 2015.
Big Heart Pet Brands, with nearly 2,500 employees, is headquartered in San Francisco, Calif. The company is currently owned by a consortium of investors led by funds affiliated with Kohlberg Kravis Roberts & Co. L.P. (KKR), Vestar Capital Partners (Vestar), Centerview Capital (Centerview), and AlpInvest Partners Inc. (AlpInvest). The company changed its name from Del Monte Corporation to Big Heart Pet Brands following the sale of its fruit, vegetable, and other consumer foods portfolio on February 18, 2014.
The acquisition is expected to provide 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 billion pet 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 North America.
?"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," says Richard Smucker, chief executive officer. "With approximately two-thirds of U.S. households having at least one family pet, we will now be able to serve the mealtime and snacking needs of the whole family. We look forward to working with Big Heart Pet Brands' experienced and talented team to leverage our combined capabilities and scale, while further enhancing value for all our constituents."
"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," adds 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 Dave West will be joining our company to lead the pet food business as part of our talented management team and we look forward to his contributions."
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 $1.3 billion in cash, subject to adjustment for working capital and certain other amounts. The company will also assume approximately $2.6 billion of net debt of Big Heart Pet Brands, which will be refinanced by the company upon closing.
The transaction includes leased corporate facilities in San Francisco, California; Pittsburgh, Pennsylvania; and Burbank, California; and owned or leased manufacturing facilities in Decatur, Alabama; Topeka, Kansas; Lawrence, Kansas; Buffalo, New York; and Bloomsburg, Pennsylvania; as well as several research and development facilities, sales offices, and distribution centers.
The transaction is expected to close by the end of the company's current fiscal year, which ends on April 30, 2015, subject to customary closing conditions including receipt of required regulatory approvals. The company expects to incur approximately $225 million in one-time costs related to the transaction, of which approximately $150 million are expected to be cash charges. One-time costs are anticipated to be incurred primarily over the next three fiscal years, with approximately one-half of the costs expected to be recognized in fiscal 2016.