SJM To Acquire Twinkie Maker TWNK
Every morning I stock up with two bottles of Smart Water, a can of Starbucks coffee and a Core Power protein shake at a local convenience store. On some days it’s a struggle not to buy a Twinkie or Donettes – two Hostess brand desserts that I enjoy. This morning Smucker’s (SJM) announced that it is acquiring Hostess (TWNK) for an enterprise value of $5.6 billion or $34.25/share – a 22% premium to its Friday closing price. SJM will pay $30 in cash and $4.25 in stock for the shares and finance it through debt. SJM just recently divested a number of its pet food brands to Post for $1.2 billion so there’s a lot of moving and shaking going on at the company. While the acquisition is aggressive for SJM given all the debt it will have to tack onto its balance sheet and the price, I like it for the simple reason that TWNK has great brands. TWNK shares are +19% while SJM’s are -8% on the news. I’m giving SJM management the benefit of the doubt here and picked up a few shares.