The J.M. Smucker Co. Announces Agreement to Divest Certain Value Brands in Continued Portfolio Optimization of Sweet Baked Snacks Segment

Rhea-AI Summary

The J.M. Smucker Co. (NYSE: SJM) has announced an agreement to sell its Cloverhill and Big Texas brands, along with certain private label products, to JTM Foods, for approximately $40 million in cash. The transaction includes trademarks, licenses, and a manufacturing facility in Chicago, with about 400 employees transitioning to JTM.

The divested brands generated net sales of approximately $30 million for fiscal year 2024 (partial year) and are projected to reach $60 million for fiscal year 2025. The company plans to use the proceeds to reduce debt and expects the divestiture to have minimal impact on adjusted earnings per share. The transaction is set to close in Q4 of fiscal year 2025.

This strategic move aligns with Smucker's portfolio optimization efforts, focusing resources on growing the Hostess® brand and strengthening its position in the sweet baked goods category while optimizing manufacturing operations to reduce costs and complexity.

Positive

• Strategic divestment to optimize portfolio and focus on core Hostess® brand
• $40 million cash infusion to be used for debt reduction
• Reduction in operational complexity through manufacturing network optimization

Negative

• Loss of approximately $60 million in annual revenue from divested brands

Insights

Financial Analyst

This strategic divestiture reveals J.M. Smucker's sophisticated approach to portfolio optimization, particularly noteworthy given the recent acquisition of these assets in November 2023. The $40 million transaction price for assets generating $60 million in annual revenue represents a 0.67x price-to-sales multiple, which is appropriate for value brands in the current market environment.

The deal structure offers three key strategic advantages:

• Operational streamlining by transferring a Chicago facility and 400 employees, reducing fixed costs and complexity
• Enhanced focus on the premium Hostess® brand, which typically commands higher margins and better shelf positioning
• Immediate debt reduction through cash proceeds, strengthening the balance sheet

The rapid divestiture timing, less than three months after acquisition, suggests these brands were likely non-core assets acquired as part of a larger transaction. This swift action demonstrates management's commitment to portfolio optimization and efficient capital allocation.

The immaterial impact on adjusted EPS, despite divesting $60 million in revenue, indicates these were likely lower-margin operations. This aligns with the broader industry trend of large CPG companies divesting value brands to focus on premium offerings with stronger growth potential and better margins.

ORRVILLE, Ohio, Jan. 31, 2025 /PRNewswire/ -- The J.M. Smucker Co. (NYSE: SJM) announced today it has reached a definitive agreement to divest its Cloverhill and Big Texas brands, as well as certain private label products, to JTM Foods, LLC (JTM). The all-cash transaction is valued at approximately $40 million, subject to a working capital adjustment, and includes relevant trademarks and licenses and the Company's manufacturing facility in Chicago, Illinois. Approximately 400 employees will also transition with the business.

"This divestiture reflects our continued commitment to portfolio optimization to prioritize resources to support the execution of our Sweet Baked Snacks strategy, focused on growing the Hostess® brand, and advancing our leadership in the sweet baked goods category," said Dan O'Leary, Senior Vice President and General Manager, Sweet Baked Snacks and Pet. "This decision continues the ongoing work to ensure our manufacturing network is optimized to mitigate costs and reduce complexity."

The divested value brands and private label products generated net sales of approximately $30 million for the Company's fiscal year ended April 30, 2024, which represents a partial year of net sales reported in its Sweet Baked Snacks segment results following its acquisition on November 7, 2023. For fiscal year 2025, the Company anticipates full-year net sales from the divested value brands and private label products to be approximately $60 million.

The Company expects the divestiture to be immaterial to its adjusted earnings per share on a full-year basis. The Company anticipates using the net proceeds from the transaction to pay down debt. The Company will provide additional information about the transaction's impact, which is expected to be immaterial to its fiscal year 2025 outlook, when it releases its third quarter results.  

The transaction is anticipated to close in the fourth quarter of the Company's current fiscal year ending April 30, 2025. RBC Capital Markets, LLC, is serving as the Company's financial advisor, and Benesch, Friedlander, Coplan & Aronoff LLP is serving as the Company's legal advisor in connection with the transaction.  

The J.M. Smucker Co. Forward Looking Statements

This press release ("Release") includes certain forward-looking statements within the meaning of federal securities laws. The forward-looking statements may include statements concerning our current expectations, estimates, assumptions and beliefs concerning future events, conditions, plans and strategies that are not historical fact. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as "expect," "anticipate," "believe," "intend," "will," "plan," "strive" and similar phrases. Federal securities laws provide a safe harbor for forward-looking statements to encourage companies to provide prospective information. We are providing this cautionary statement in connection with the safe harbor provisions. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made, when evaluating the information presented in this Release, as such statements are by nature subject to risks, uncertainties and other factors, many of which are outside of our control and could cause actual results to differ materially from such statements and from our historical results and experience. These risks and uncertainties include, but are not limited to, the following: uncertainties relating to the timing of the consummation of the sale of the Cloverhill and Big Texas brands and certain private label products to JTM (the "Transaction"); the possibility that any or all of the conditions to the consummation of the Transaction may not be satisfied or waived; and those described under "Risk Factors" in reports and statements filed by the Company with the U.S. Securities and Exchange Commission. We do not undertake any obligation to update or revise these forward-looking statements to reflect new events or circumstances. 

About The J.M. Smucker Co.

At The J.M. Smucker Co., it is our privilege to make food people and pets love by offering a diverse family of brands available across North America. We are proud to lead in the coffee, peanut butter, fruit spreads, frozen handheld, sweet baked goods, dog snacks, and cat food categories by offering brands consumers trust for themselves and their families each day, including Folgers^®, Dunkin'^®, Café Bustelo^®, Jif^®, Smucker's^® Uncrustables^®, Smucker's^®, Hostess^®, Milk-Bone^®, and Meow Mix^®. Through our unwavering commitment to producing quality products, operating responsibly and ethically and delivering on our Purpose, we will continue to grow our business while making a positive impact on society. For more information, please visit jmsmucker.com.

The J.M. Smucker Co. is the owner of all trademarks referenced herein, except for Dunkin'^®, which is a trademark of DD IP Holder LLC. The Dunkin'^® brand is licensed to The J.M. Smucker Co. for packaged coffee products sold in retail channels such as grocery stores, mass merchandisers, club stores, e-commerce and drug stores, and in certain away from home channels. This information does not pertain to products for sale in Dunkin'^® restaurants.

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SOURCE The J.M. Smucker Co.

FAQ

How much is SJM selling its Cloverhill and Big Texas brands for?

The J.M. Smucker Co. is selling these brands to JTM Foods, for approximately $40 million in an all-cash transaction, subject to working capital adjustment.

What is the annual revenue impact of SJM's brand divestiture?

The divested brands are expected to generate approximately $60 million in net sales for fiscal year 2025.

How many employees will be affected by SJM's sale of Cloverhill and Big Texas brands?

Approximately 400 employees will transition from J.M. Smucker Co. to JTM Foods, as part of the transaction.

When will SJM complete the sale of Cloverhill and Big Texas brands?

The transaction is expected to close in the fourth quarter of the company's fiscal year ending April 30, 2025.

How will SJM use the proceeds from the Cloverhill and Big Texas brands sale?

The company plans to use the net proceeds from the $40 million transaction to pay down debt.