J,M. Smucker's Bittersweet Deal
J.M. Smucker Co., known for its popular food brands like Folgers, Smuckers, and Meow Mix, is making strategic moves in the corporate bond market. The company aims to secure funding for its $5.6 billion acquisition of Hostess Brands Inc., the maker of iconic treats like Twinkies and HoHos. This acquisition was first announced in September.
In a regulatory filing, the company detailed its plan to issue a four-tranche bond offering, featuring fixed-rate notes with maturities of five years, ten years, twenty years, and thirty years. Notably, J.M. Smucker holds credit ratings of Baa3 from Moody's and BBB from S&P Global Ratings.
Utilization of Proceeds
The proceeds from this bond offering will be allocated as follows:
- Financing the cash portion of the Hostess Brands acquisition.
- Repayment of debt owed by Hostess Brands and its subsidiaries.
- Covering fees associated with the acquisition.
Hostess Shareholder Offer
Hostess shareholders will receive $30.00 in cash and 0.03002 shares of J.M. Smucker for each Hostess share they own. This deal values Hostess shares at $34.25 each, representing a substantial 21.8% premium over the prior session's closing price at the time of the acquisition announcement.
Market Insights
Data from BondCliQ Media Services reveals strong demand for J.M. Smucker's bonds in the past ten days, with increased net buying across all maturity periods. Additionally, the company has a significant $1 billion of bonds maturing in 2025.
Bond Performance
While spreads on J.M. Smucker's existing bonds have remained relatively stable, some bonds, such as the 4.25% notes maturing in 2035, experienced a widening of about 20 basis points when the acquisition was initially announced on September 11.
Stock Performance
On the stock front, J.M. Smucker Co. saw a 1.3% decline on Wednesday, marking a year-to-date decrease of 28%. In contrast, the S&P 500 has gained 13.6% during the same period.
