(Bloomberg) — JM Smucker Co. said it reached an agreement with Post Holdings Inc. to sell pet-food brands, including Rachael Ray Nutrish and Kibbles ‘n Bits, for $1.2 billion.
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Post will pay with $700 million in cash and about 5.4 million of its shares, according to a statement. JM Smucker estimates the brands, which also consist of 9Lives, Nature’s Recipe, Gravy Train and a private-label business, will generate about $1.5 billion in sales the fiscal year that concludes April 30. The transaction is expected to close in the quarter that ends the same date.
In a separate statement, Post Holdings estimated the sales for the fiscal year would be about $1.4 billion. The post will issue new shares to JM Smucker for the transaction, while the other portion will be funded with cash on hand and proceeds from a revolving credit facility.
Pet foods are a fast-growing business as consumers pay more attention to their pets and spend more on premium ingredients. The most dynamic expansion has been at the top end of the segment. Stifel, citing data from Euromonitor, sees North American pet-food sales rising to more than $64 billion in 2027, up from an estimated $49.2 billion in 2022.
The deal “will provide Post with a compelling entry point into the attractive and growing pet-food category,” the company said.
What Bloomberg Intelligence Says
“This is bold in magnitude, as we had expected smaller divestitures over time, but it’s unreasonable. Dog food is the biggest category in the pet segment, but Smucker isn’t a leader, trailing Nestlé, General Mills and Mars significantly.”
— Diana Rosero-Pena, consumer-staples analyst
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JM Smucker will focus on its dog snacks and cat food under the Milk-Bone and Meow Mix brands as part of its “strategy to prioritize investments and resources in the areas of our business that offer the strongest growth and profit potential,” Chief Executive Officer Mark Smucker said in the statement.
The transaction includes manufacturing and distribution facilities in Bloomsburg, Pennsylvania, as well as plants in Meadville, Pennsylvania, and Lawrence, Kansas.
The post said about 1,000 workers will transition to its workforce from JM Smucker.
JM Smucker shares rose less than 1% in late trading. Post stocks rose 1.5%.
–With assistance from Daniela Sirtori-Cortina.
(Updates with Post statement in third paragraph, shares in final paragraph. A previous version corrected the name of a pet-food brand in the first paragraph.)
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