04.09.18
The J. M. Smucker Company has signed a definitive agreement to acquire Ainsworth Pet Nutrition, LLC in a transaction valued at approximately $1.7 billion, after an estimated tax benefit of $200 million. The company will also explore strategic options for its U.S. baking business, including a potential sale.
Ainsworth is a leading producer, distributor, and marketer of premium pet food and pet snacks, predominately within the U.S. Approximately two-thirds of Ainsworth's sales are generated by its Rachael Ray Nutrish brand, which is driving significant growth in the premium pet food category. Ainsworth also sells pet food and pet snacks under several additional branded and private label trademarks.
Benefits of the transaction are expected to include the following:
"Smucker's decision to acquire Ainsworth Pet Nutrition validates the power of the Ainsworth company mission," said Jeff Watters, president & CEO of Ainsworth. "At Ainsworth, our goal has been to improve the lives of pet families everywhere by making high quality pet food accessible to all pet parents. This single-minded focus has resonated with consumers and will continue to resonate under Smucker leadership."
"After five generations, our family, in partnership with L Catterton, made the decision to sell Ainsworth Pet Nutrition to The J. M. Smucker Company," said Sean Lang, executive chairman of ainsworth. "We took great care to find the right home for our brands and our people, to whom we are so grateful. The J. M. Smucker Company, also a fifth-generation family company, is led by a like-minded family to our own. We expect the combined horsepower of these pet care organizations to achieve great things."
"It has been an important goal of mine to help create pet food with the same care I use when creating my recipes, as well as a brand that has been able to donate over $27 million to help animals in need," said Rachael Ray. "So I am pleased that The J. M. Smucker Company is committed not only to maintaining the high quality of the Nutrish brand, but continuing the philanthropic efforts of the brand through donations to The Rachael Ray Foundation, which helps those animals that are less fortunate than our own."
The J. M. Smucker Company anticipates the acquired business to contribute net sales of approximately $800 million in the first full year after closing the transaction.
Annual cost synergies of approximately $55 million are expected to be fully realized within three years after closing, with approximately $25 million anticipated in the first year. After giving effect to the first year of synergies, the company expects the acquired business to generate earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $110 million in the first full year after closing the transaction, excluding one-time costs, and contribute approximately $0.25 of accretion to the Company's adjusted earnings per share.
The all-cash transaction, which The J. M. Smucker Company will fund with debt, is valued at $1.9 billion, prior to an expected tax benefit related to the acquisition with a present value of approximately $200 million. After factoring in the estimated tax benefit and anticipated annual cost synergies of $55 million, the purchase price represents a multiple of approximately 12 times EBITDA.
Ainsworth is a privately-held company headquartered in Meadville, PA. In addition to its headquarters, the transaction includes two manufacturing facilities owned by Ainsworth, which are located in Meadville, PA and Frontenac, KS, and a leased distribution facility in Greenville, PA. The J. M. Smucker Company anticipates that over 700 Ainsworth employees will join it in conjunction with the transaction. Ainsworth operates two additional manufacturing facilities that are primarily used to provide contract manufacturing services to third-party pet food distributors. Those facilities and the associated business are not included in this transaction.
The J. M. Smucker Company expects to incur approximately $50 million in one-time costs related to the acquisition, the majority of which are expected to be cash charges. Approximately two-thirds of the one-time costs are expected to be recognized in the first year after the closing of the transaction.
The transaction is expected to close early in the company's fiscal year beginning May 1, 2018, subject to customary closing conditions including receipt of required regulatory approvals.
Bank of America Merrill Lynch provided committed financing for the Ainsworth transaction.
Ainsworth is a leading producer, distributor, and marketer of premium pet food and pet snacks, predominately within the U.S. Approximately two-thirds of Ainsworth's sales are generated by its Rachael Ray Nutrish brand, which is driving significant growth in the premium pet food category. Ainsworth also sells pet food and pet snacks under several additional branded and private label trademarks.
Benefits of the transaction are expected to include the following:
- Pet food and pet snacks has become the largest center-of-the-store category in the U.S. Food and Beverage market, generating over $30 billion in annual retail sales across all channels, and remains one of the fastest-growing categories. This acquisition and the addition of the high-growth Nutrish brand will increase the scale and further accelerate the growth profile of the Company's pet food business.
- Nutrish holds a leading position and is one of the fastest-growing brands in the premium dry dog food segment within the grocery and mass channels, a key growth driver for the overall category. The addition of Nutrish to the company's portfolio will significantly expand The J. M. Smucker Company’s presence in this area, complementing its Nature's Recipe brand.
- The transaction further strengthens The J. M. Smucker Company’s position in dog snacks with the presence of Nutrish in fast-growth segments, including natural meats and long-lasting chews.
- While Nutrish has a relatively smaller presence in premium cat food, the brand is well-positioned for significant growth in this segment. This will help accelerate opportunities in the Company's current pet food portfolio.
"Smucker's decision to acquire Ainsworth Pet Nutrition validates the power of the Ainsworth company mission," said Jeff Watters, president & CEO of Ainsworth. "At Ainsworth, our goal has been to improve the lives of pet families everywhere by making high quality pet food accessible to all pet parents. This single-minded focus has resonated with consumers and will continue to resonate under Smucker leadership."
"After five generations, our family, in partnership with L Catterton, made the decision to sell Ainsworth Pet Nutrition to The J. M. Smucker Company," said Sean Lang, executive chairman of ainsworth. "We took great care to find the right home for our brands and our people, to whom we are so grateful. The J. M. Smucker Company, also a fifth-generation family company, is led by a like-minded family to our own. We expect the combined horsepower of these pet care organizations to achieve great things."
"It has been an important goal of mine to help create pet food with the same care I use when creating my recipes, as well as a brand that has been able to donate over $27 million to help animals in need," said Rachael Ray. "So I am pleased that The J. M. Smucker Company is committed not only to maintaining the high quality of the Nutrish brand, but continuing the philanthropic efforts of the brand through donations to The Rachael Ray Foundation, which helps those animals that are less fortunate than our own."
The J. M. Smucker Company anticipates the acquired business to contribute net sales of approximately $800 million in the first full year after closing the transaction.
Annual cost synergies of approximately $55 million are expected to be fully realized within three years after closing, with approximately $25 million anticipated in the first year. After giving effect to the first year of synergies, the company expects the acquired business to generate earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $110 million in the first full year after closing the transaction, excluding one-time costs, and contribute approximately $0.25 of accretion to the Company's adjusted earnings per share.
The all-cash transaction, which The J. M. Smucker Company will fund with debt, is valued at $1.9 billion, prior to an expected tax benefit related to the acquisition with a present value of approximately $200 million. After factoring in the estimated tax benefit and anticipated annual cost synergies of $55 million, the purchase price represents a multiple of approximately 12 times EBITDA.
Ainsworth is a privately-held company headquartered in Meadville, PA. In addition to its headquarters, the transaction includes two manufacturing facilities owned by Ainsworth, which are located in Meadville, PA and Frontenac, KS, and a leased distribution facility in Greenville, PA. The J. M. Smucker Company anticipates that over 700 Ainsworth employees will join it in conjunction with the transaction. Ainsworth operates two additional manufacturing facilities that are primarily used to provide contract manufacturing services to third-party pet food distributors. Those facilities and the associated business are not included in this transaction.
The J. M. Smucker Company expects to incur approximately $50 million in one-time costs related to the acquisition, the majority of which are expected to be cash charges. Approximately two-thirds of the one-time costs are expected to be recognized in the first year after the closing of the transaction.
The transaction is expected to close early in the company's fiscal year beginning May 1, 2018, subject to customary closing conditions including receipt of required regulatory approvals.
Bank of America Merrill Lynch provided committed financing for the Ainsworth transaction.
