JM Smucker to buy Ainsworth for US$1.7bn

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05 Apr 2018 --- The JM Smucker Company has announced that it will acquire Ainsworth Pet Nutrition, LLC in a transaction valued at approximately US$1.7 billion, after an estimated tax benefit of $200 million. The company also announced that it would explore strategic options for its US baking business, including a potential sale.

Ainsworth is a leading producer, distributor, and marketer of premium pet food and pet snacks, predominately within the US. Approximately two-thirds of Ainsworth's sales are generated by its Rachael Ray Nutrish brand, which is driving significant growth in the premium pet food category. Ainsworth also sells pet food and pet snacks under several additional branded and private label trademarks.
 
Click to Enlarge
Rachael Ray Nutrish Peak Natural Wild Ridge Recipe
With Chicken And Lamb In Savory Gravy For Dogs.
Pet food and pet snacks have become the largest center-of-the-store category in the US food and beverage market, generating over US$30 billion in annual retail sales across all channels, and remains one of the fastest-growing categories. This acquisition and the addition of the high-growth Nutrish brand will increase the scale and further accelerate the growth profile of the company's pet food business.

Nutrish holds a leading position and is one of the fastest-growing brands in the premium dry dog food segment within the grocery and mass channels, a key growth driver for the overall category. The addition of Nutrish to the Company's portfolio will significantly expand the company's presence in this area, complementing the Company's Nature's Recipe brand.

The transaction further strengthens the company's position in dog snacks with the presence of Nutrish in fast-growth segments, including natural meats and long-lasting chews.

While Nutrish has a relatively smaller presence in premium cat food, the brand is well-positioned for significant growth in this segment. This will help accelerate opportunities in the company's current pet food portfolio.

“Ainsworth Pet Nutrition is an excellent strategic fit for our Company, as the Rachael Ray Nutrish brand adds another high-growth, on-trend brand to our pet food portfolio,” says Mark Smucker, Chief Executive Officer. “Their team has done a tremendous job growing this business, building Nutrish into one of the most recognizable premium pet food brands in the US. We look forward to working with the talented Ainsworth team, as we know their passion for pets runs as deep as ours.” 

“Smucker's decision to acquire Ainsworth Pet Nutrition validates the power of the Ainsworth company mission,” said Jeff Watters, President & CEO of Ainsworth. “At Ainsworth, our goal has been to improve the lives of pet families everywhere by making high-quality pet food accessible to all pet parents. This single-minded focus has resonated with consumers and will continue to resonate under Smucker leadership.”

The all-cash transaction, which the company will fund with debt, is valued at $1.9 billion, before an expected tax benefit related to the acquisition with a present value of approximately US$200 million. After factoring in the estimated tax benefit and anticipated annual cost synergies of US$55 million, the purchase price represents a multiple of roughly 12 times EBITDA.
 
The company expects to incur approximately US$50 million in one-time costs related to the acquisition, the majority of which are expected to be cash charges. Nearly two-thirds of the one-time costs are expected to be recognized in the first year after the closing of the transaction.

The transaction is expected to close early in the company's fiscal year beginning May 1, 2018, subject to customary closing conditions including receipt of required regulatory approvals. 

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