A definitive agreement was announced today between the J.M. Smucker Co. and Procter & Gamble to merge the Folgers coffee business into the Smucker Co. in a deal valued at approximately $3.3 billion. With the addition of Folgers, the total size of the categories in which Smucker participates increases to approximately $15 billion as compared to $1 billion in 2002.
According to a release, the addition of Folgers is consistent with Smucker's strategy to own and market quality food brands in North America. Tim Smucker, the company's chairman and co-CEO, said the , a billion-dollar brand is a perfect strategic fit within the the company's portfolio of North American food brands.
"Folgers will become our tenth number one brand in North America and will further enhance the high quality, great tasting, diverse product offerings that consumers expect from Smucker," said Smucker. "We are proud to welcome the talented Folgers employees to the Smucker Co., where brands and people are about more than making and marketing products. We believe the many common values shared by our organizations represent a great foundation for a smooth integration."
Since adding Jif and Crisco in 2002, the Smucker Co. has continued to expand its portfolio by completing ten brand acquisitions. For example, Jif has experienced an annualized sales growth of 7%, increased its share of market by 7 share points, and introduced a variety of new product. "We have developed a core competency of integrating our acquisitions in a timely fashion and growing the brands," Smucker added.
Strategically, Procter & Gamble has exited certain categories in order to focus on core businesses and enhance the growth profile of its portfolio, according to A.G. Lafley, chairman of the board and CEO of P&G. The structure and terms of this transaction deliver on goals the stated for the separation of the coffee business from P&G.
"Smucker has proven to be an excellent steward of Jif and Crisco since taking ownership of the brands from P&G in 2002 and I am confident that Folgers will continue to thrive as part of The J. M. Smucker Company," said Lafley. "Smucker's core beliefs, values, and principles are very much the same as those of P&G. We cannot think of a better long-term home for P&G's former coffee employees and brands than Smucker."
The transaction is expected to close in the fourth quarter of 2008, subject to customary closing conditions including regulatory and Smucker shareholder approvals. Smucker expects to incur approximately $100 million in one-time costs related to the transaction over the next 12 to 24 months.
Following completion of the transaction, the expanded Smucker Co. will add over 1,250 employees including sales, marketing, coffee procurement, product development, supply chain and administrative functions in Cincinnati, Ohio, and manufacturing plants in New Orleans, La., Kansas City, Mo., and Sherman, Texas, along with a key distribution center in New Orleans.