J.M. Smucker to sell several pet food brands to Post Holdings for $1.2B

The J.M. Smucker Co. (SJM) announced it has entered into a definitive agreement to sell several pet food brands to Post Holdings (POST) headquartered in St. Louis, Missouri. The transaction is valued at approximately $1.2B, consisting of $700M in cash and approximately 5.39M shares of common stock of Post Holdings. The transaction includes the Rachael Ray Nutrish, 9Lives, Kibbles ‘n Bits, Nature’s Recipe, and Gravy Train brands as well as the company’s private label pet food business. The transaction includes relevant trademarks and licenses, and the company’s manufacturing and distribution facilities in Bloomsburg, Pennsylvania, as well as its manufacturing facilities in Meadville, Pennsylvania and Lawrence, Kansas. In addition, a group of employees will transition to Post Holdings, Inc. to support the business. The company expects these brands to generate net sales of approximately $1.5B for the fiscal year ended April 30, which are primarily reported in the U.S. Retail Pet Foods segment. The Company expects the divestiture to be dilutive to its adjusted earnings per share by approximately 45c on a full-year basis, reflecting the foregone profit related to the divested brands and before factoring in any benefits from the use of transaction proceeds and the impact of stranded overhead costs. The company anticipates replacing the divested earnings through the deployment of transaction proceeds and mitigating the impact of stranded overhead costs through initiatives within its Transformation Office over time. The transaction is anticipated to close in the fourth quarter of the company’s current fiscal year ending April 30, subject to closing conditions including the receipt of required regulatory approvals.