The J. M. Smucker Co. is locked in a deal to acquire Ainsworth Pet Nutrition LLC for approximately $1.7 billion. The premium pet food and snack maker is best known for its Rachael Ray™ Nutrish® brand, which comprises some two-thirds of its sales and is driving significant growth in the $30 billion pet food category. Nutrish also has a presence in natural meats and long-lasting chews, and a smaller presence in premium cat food. In addition to the brands, J.M. Smucker will also get:
- Ainsworth’s Meadville, Pennsylvania, headquarters
- Two manufacturing facilities in Meadville and Frontenac, Kansas
- A leased distribution facility in Greenville, Pennsylvania
- J.M. Smucker anticipates that more than 700 Ainsworth employees will join the company in conjunction with the transaction.
- Not part of this deal are two manufacturing facilities Ainsworth operates primarily for contract manufacturing services to third-party pet food distributors.
"Ainsworth Pet Nutrition is an excellent strategic fit for our company, as the Rachael RayTM Nutrish® brand adds another high-growth, on-trend brand to our pet food portfolio," said Mark Smucker, CEO, in a statement. "Their team has done a tremendous job growing this business, building Nutrish into one of the most recognizable premium pet food brands in the United States. We look forward to working with the talented Ainsworth team, as we know their passion for pets runs as deep as ours." Financial details:
- J.M. Smucker anticipates the acquired business to contribute net sales of approximately $800 million in the first full year after closing.
- 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, J.M. Smucker expects the acquired business to generate earnings before interest, taxes, depreciation, and amortization of approximately $110 million in the first full year after closing the transaction, excluding one-time costs — of which the company expects to pay $50 million — and contribute approximately $0.25 of accretion to the company's adjusted earnings per share.
- The all-cash transaction, which J.M. Smucker 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.
- The transaction is expected to close early in the company's fiscal year beginning May 1, 2018, subject to customary closing conditions and regulatory approvals.
- Bank of America Merrill Lynch provided committed financing for the Ainsworth transaction.
The company also confirmed in its release that it will explore strategic options for its U.S. baking business, including a potential sale, rumors of which surfaced early in March.
