Smucker's In Pet Food Business With Milk-Bone Acquisition

(RTTNews) - J. M. Smucker Co (SJM) on Tuesday forayed into the pet food and snacks business after agreeing to buy Big Heart Pet Brands, the owner of Milk-Bone dog treats and Meow Mix cat food, in a cash-and-stock deal valued at about $5.8 billion, including debt.

As per the terms of the deal, Smucker will pay 17.9 million shares and $1.3 billion in cash for Big Heart Pet Brands, and will will refinance $2.6 billion of Heart Pet Brands' debt.

Following the announcement, Smucker shares gained more than 3 percent in after-hours trade on the New York Stock Exchange.

Smucker said the deal would give it an immediate presence in the $21 billion pet food and snacks category.

The company expects the deal to add $2.4 billion in sales to the fiscal year ending April 2016. It also expects the deal to be slightly accretive to fiscal 2016 earnings per share, excluding one-time costs.

The deal is expected to close by the end of Big Heart Pet Brands' current fiscal year, on May 3.

Dave West, chief executive of Big Heart Pet Brands, will lead Smucker's pet food business and will be nominated to the company's board.

Big Heart Pet Brands, with nearly 2,500 employees, is based in San Francisco, California. It is owned by a consortium of investors led by funds affiliated with Kohlberg Kravis Roberts & Co. L.P. (KKR), Vestar Capital Partners, Centerview Capital, and AlpInvest Partners Inc.

SJM closed Tuesday at $105.88, up $1.41 or 1.35%, on a volume of 406k shares. In after hours, the stock gained $3.47 or 3.28% at $109.35.