Tuesday, March 9, 2004

Smucker's buys big

$500 million for Pillsbury, Hungry Jack, other brands

The Associated Press and The Cincinnati Enquirer

Pillsbury, Hungry Jack, other brands ORRVILLE, Ohio - The J.M. Smucker Co. is teaming up with the Pillsbury Doughboy.

Smucker, based in the small northeast Ohio town of Orrville, said Monday that it is acquiring Minneapolis-based International Multifoods Corp., the maker of Pillsbury, Hungry Jack and other food brands, in a $500 million cash and stock deal. Shares of International Multifoods surged 25 percent on the news.

The agreement calls for Multifoods shareholders to get $25 a share in a stock and cash combination. The maker of Smucker's jams and Jif peanut butter also would assume about $340 million of Multifoods' debt.

Shares of International Multifoods soared $5.07, or 25.7 percent, Monday to $24.70, while Smucker shares dropped $2.61, or 5 percent, to $49.32, both on the New York Stock Exchange.

Merrill Lynch reduced its rating of Smucker stock from buy to neutral. Analyst Farha Aslam issued a report that "the price Smucker's paid is rich" and said the timing may not have been the best.

"IMC's portfolio is heavily carb focused at a time when many Americans are reducing their intake of carbohydrates," Aslam said.

Smucker has a local connection: It bought Crisco shortening and Jif from Procter & Gamble Co. in 2002 for about $675 million. P&G shareholders received 1 share of new Smucker stock for each 50 shares of P&G they held.

Smucker also operates a plant in Cincinnati.

The International Multifoods purchase also will give Smucker the Canadian brands Robin Hood flour and baking mixes and Bick's pickles and condiments.

Combined sales of the two companies are expected to exceed $2.3 billion.

Smucker wanted to increase its presence in stores' baking aisles, said Tim Smucker, chairman and chief executive officer. "These brands are complementary to our own and add significantly to our market presence in North America," he told analysts.

"The Pillsbury brand is clearly an American icon, and the history and heritage of the brand is very similar to Smucker's Jif and Crisco," he said. "It evokes an image of family togetherness, tradition and homemade goodness."

The purchase will strengthen the company's position to be able to buy other complementary brands in the future, Smucker said.

Multifoods spokesman John Seitz said it's too soon to know if any jobs will be eliminated in the merger.

Gary Costley, Multifoods chairman and CEO, said the companies are a good match.

"Smucker's experience in brand management and its demonstrated success in growing market share in center-of-the-store brands made it the right choice to take Multifoods brands to the next level of performance," he said.

Multifoods completed in November 2001 the acquisition from General Mills of the Pillsbury desserts and specialty products businesses for about $304.5 million in cash.

Smucker said General Mills retains the Pillsbury frozen and refrigerated food brands. Smucker will get the Pillsbury baking products.

Costley said a 20-year licensing agreement for the Doughboy will be transferred to Smucker.

International Multifoods Corp.

Business: Manufacturer and marketer of branded consumer foods and food-service products in North America. Primary brands include Pillsbury baking mixes and ready-to-spread frostings; Hungry Jack pancake mixes, syrup and potato side dishes; Martha White baking mixes and ingredients; and Pet evaporated milk and dry creamer.

Headquarters: Minneapolis.

Chief executive: Gary Costley.

Employees: 2,377.

Ticker/market: IMC/NYSE.

Monday's close: $24.70.

Revenues (2003): $939.3 million

Profits (2003): Loss of $46 million.

J.M. Smucker Co.

Business: Manufactures and markets food products globally. Items include fruit spreads, ice cream toppings, shortenings and oils, health and natural-foods beverages and peanut butter under such brands as Smucker's, Jif, Crisco, Simply Fruit and Goober. Founded in 1897.

Headquarters: Orrville, Ohio.

Chief executives: Timothy and Richard Smucker

Employees: 2,700.

Ticker/market: SJM/NYSE.

Monday's close: $49.32.

Revenues (2003): $1.3 billion

Profits (2003): $96.3 million.


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