J. M. Smucker signed a definitive agreement to acquire Hostess Brands for $34.25 per share in a cash and stock transaction, representing a total enterprise value of approximately $5.6 billion which includes approximately $900 million of net debt.
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This represents an adjusted EBITDA multiple of approximately 17.2x based on the Company's estimate of Hostess Brands full year 2023 results, and an approximate 13.2x multiple when including anticipated run rate synergies of $100 million.
The acquisition expands the Company's offering of beloved brands in growing categories and accelerates its focus on convenient consumer occasions.
The Company through its wholly owned subsidiary SSF Holdings will commence an exchange offer to acquire all outstanding shares of Hostess at a price of $34.25 per share of Hostess common stock, consisting of $30.00 of cash and .03002 of a share of the Company's common stock (having a value of $4.25 based on the closing price of the Company's common stock on Friday, September 8, 2023) to be exchanged for each Hostess share.
The closing of the exchange offer will be subject to certain conditions, including the tender of at least a majority of the outstanding shares of Hostess common stock and other customary closing conditions, including receipt of required regulatory approvals.
Upon the successful completion of the exchange offer, the Company will acquire all of the remaining shares of Hostess common stock that were not tendered in the exchange offer through a second-step merger for the same consideration per share as paid in the exchange offer.
The cash portion of the transaction is expected to be funded through a combination of cash on hand, a bank term loan and long-term public bonds. The transaction is not subject to a financing condition.
The Company has secured $5.2 billion in a fully committed bridge financing from Bank of America and RBC Capital Markets.
Pro forma total net debt estimated at the closing date will be approximately $8.6 billion and the pro forma total net debt to EBITDA ratio is expected to be approximately 4.4x. The Company intends to maintain its balanced capital deployment model, along with an investment grade debt rating. ■