The J.M. Smucker Co. has entered into a definitive agreement to sell its Natural Balance pet food business to Nexus Capital Management LP, in a cash transaction valued at approximately $50 million, subject to a working capital adjustment and before a one-time cash tax benefit to be realized on the sale. The transaction encompasses pet food products sold under the Natural Balance brand, certain trademarks and licensing agreements, and select employees who support the Natural Balance® business. The business generated net sales of approximately $220 million for the Company's fiscal year ended April 30, 2020, which were reported in its U.S. Retail Pet Foods segment.
"The divestiture reflects our strategy to direct investments and resources toward areas of the business that will generate the greatest growth and profitability," said Mark Smucker, President and Chief Executive Officer, The J.M. Smucker Co. "Today's announcement helps the Company further focus on the core brands within our pet food and pet snacks portfolio including Rachael Ray® Nutrish®, Milk-Bone® and Meow Mix® among others, which together create a unique portfolio with significant long-term growth potential that meets consumer needs across value, mainstream and premium offerings."
The Company expects the divestiture to be dilutive to its adjusted earnings per share in the range of $0.05 to $0.10 on a full-year basis, reflecting the foregone profit related to the Natural Balance® business, before factoring in any potential benefit from the use of proceeds from the sale. The Company will discuss the transaction's impact on its fiscal year 2021 outlook when it releases its third quarter results in February 2021 and anticipates the earnings impact will be immaterial.
The transaction is expected to close in the third quarter of the Company's 2021 fiscal year, subject to customary closing conditions.
The Company appointed Goldman Sachs & Co. LLC as financial advisor and Calfee, Halter & Griswold LLP as legal advisor to assist with the sale of the Natural Balance® pet food business.