ORRVILLE, Ohio - The J.M. Smucker Co. (NYSE: SJM) has reached a definitive agreement to sell its Voortman® cookie brand to Second Nature Brands for approximately $305 million in cash, the company announced today. The sale is part of Smucker's strategy to concentrate on its core growth brands and includes the transfer of a leased manufacturing facility in Burlington (NYSE:BURL), Ontario, Canada, along with roughly 300 employees.
The transaction, subject to customary closing conditions and regulatory approvals, is expected to be finalized in the third quarter of the fiscal year ending April 30, 2025. This divestiture aligns with Smucker's focus on its Sweet Baked Snacks segment and the integration of the Hostess® brand, which the company is positioning to lead in the sweet baked goods category.
Mark Smucker, President and CEO, stated, "The divestiture of the Voortman® brand is an important step in our integration plans that will enable the execution of our Sweet Baked Snacks strategy." He also acknowledged the contributions of the employees associated with the Voortman® brand.
The Voortman® brand, acquired on November 7, 2023, reported net sales of approximately $65 million for the partial fiscal year ended April 30, 2024. The company had projected full-year net sales of $150 million for the Voortman® brand in fiscal year 2025.
The sale is expected to reduce Smucker's adjusted earnings per share by about $0.25 on a full-year basis before accounting for any benefits from the transaction proceeds. The company plans to use the proceeds to pay down debt, which is anticipated to benefit earnings per share by approximately $0.10 on a full-year basis. Smucker will provide more details on the impact of the transaction on its fiscal year 2025 outlook in its second-quarter results.
Goldman Sachs & Co., LLC and Blake, Cassels & Graydon LLP are acting as financial and legal advisors, respectively, to Smucker in connection with the sale.
The information is based on a press release statement from The J.M. Smucker Co.
In other recent news, J.M. Smucker reported a significant beat in first-quarter earnings for fiscal year 2025, despite a subsequent decrease in its sales and earnings per share forecast. TD Cowen and Citi have both adjusted their outlooks on J.M. Smucker, reducing the price target while maintaining a Buy rating on the company's shares. The revised forecast reflects challenges J.M. Smucker is expected to face, such as rising green coffee costs and a slowdown in consumer shopping, especially in the convenience channel. The company's CFO, Tucker Marshall, revised the full-year 2025 comparable sales growth outlook to 9%, citing inflation's impact on discretionary spending. Despite these adjustments, both TD Cowen and Citi see potential for J.M. Smucker to achieve above-average earnings growth over time. The company also reported lower earnings per share due to rising green coffee costs and a $40 million reduction in full-year expectations for the Hostess brand due to derisking efforts. These are the recent developments in the company's operations.
InvestingPro Insights
As J.M. Smucker Co. (NYSE: SJM) moves forward with its strategic divestiture of the Voortman® cookie brand, investors may find additional context from InvestingPro data and tips particularly relevant.
According to InvestingPro data, Smucker's market capitalization stands at $12.76 billion, reflecting its significant presence in the consumer goods sector. The company's P/E ratio of 16.96 suggests a reasonable valuation relative to its earnings, which could be impacted by the recent sale.
InvestingPro Tips highlight Smucker's strong dividend history, noting that the company "has raised its dividend for 14 consecutive years" and "has maintained dividend payments for 54 consecutive years." This consistent dividend performance may reassure investors concerned about the impact of the Voortman® sale on shareholder returns. The current dividend yield of 3.6% remains attractive for income-focused investors.
However, it's worth noting that "13 analysts have revised their earnings downwards for the upcoming period," which could be related to the projected $0.25 reduction in adjusted earnings per share from the Voortman® sale. Despite this, InvestingPro Tips indicate that "analysts predict the company will be profitable this year," and the company has been "profitable over the last twelve months."
The sale's proceeds, intended for debt reduction, align with a potential area of concern highlighted by InvestingPro: "Short term obligations exceed liquid assets." The $305 million from the transaction could help address this balance sheet issue.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights beyond those mentioned here. The platform lists a total of 13 tips for J.M. Smucker Co., providing a deeper dive into the company's financial health and market position.
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