Folgers has created some great brand messages, including the classic, "The best part of waking up is Folgers in your cup."
Well, this morning, we got another message. P&G (NYSE: PG) will merge the Folgers unit into the operations of The J. M. Smucker Company (NYSE: SJM). The deal comes to about $3 billion.
P&G, which has owned Folgers for more than 45 years, has been actively shopping the deal. All in all, the transaction looks smart. It's an all-stock arrangement and, as a result, is tax-free to all parties. Smucker will also issue a $5 per share special dividend.
With the deal, Smucker will nearly double its annual revenues to $4.7 billion. What's more, there are expected to be $80 million in synergies.
Smucker has had success with prior P&G deals. For example, back in 2002, the company bought P&G's Jif and Crisco brands.
And with Folgers growing at 2% to 3% per year, there is certainly a need to jump-start things. Smucker will have the focus to do that.
So far in today's trading, Smucker's shares are up 2.5% to $55.10.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
6-04-2008 @ 2:22PM
Richard Greifer said...
I've read numerous articles about the sale of PG's Folger's unit to Smuckers for all stock without a mention of the impact to PG shareholders. Does PG sit on Smucker stock as a subsidiary? Does PG distribute Smuckers stock to its shareholders on a prorated basis i.e. " X " share of Smuckers for each share of PG owned? Does PG eventually sell the Smuckers stock and keep the cash? Using a rough calculation, each 50 shares of PG owned will result in a distribution of one share of Smuckers. Does this seem reasonable?