Smucker buys Twinkies maker Hostess

Jelly maker JM Smucker buys Twinkie owners Hostess brands for $5.6 billion, or $34.25 per share.

Hostess shareholders will receive $30 in cash and 0.03002 Smucker shares for each Hostess share they owned. Smucker has also agreed to assume about $900 million of Hostess’ debt. The transaction is expected to close in Smucker’s third fiscal quarter, ending in January.

The purchase of Smucker is the latest in a series of deals by Big Food, which is looking for growth as profits slow due to the Covid-19 pandemic. Campbell’s soup recently announced its acquisition of Sovos Bands, the owner of Rao’s Pasta Sauce, for $2.7 billion. M&M owner Mars bought Kevin’s Natural Foods in July. And Unilever snapped up frozen yogurt brand Yasso in June.

Shares of Hostess rose 18% in premarket trading on Monday following the announcement. Smucker shares fell 7.5%.

As of Friday’s close, shares of Hostess were up 25% this year, giving the company a market value of $3.73 billion. But the company’s shares had already experienced a significant upswing, according to Reuters reported In late August, it announced it was considering a sale after attracting interest from major food companies including PepsiCo and Oreo manufacturers Mondelez International.

Hostess saw a decline in demand for its Twinkies and Ding Dongs after the company raised prices to mitigate higher raw material costs, sparking concerns among investors and takeover interest from larger rivals. The company expects a decline in volume for the year as a whole. Executives paused price increases.

The sale to Smucker ends Hostess’ seven-year success story as an independent, publicly traded company. Hostess went public in 2016 through a merger with a special purpose vehicle.

Just three years earlier, Apollo Global Management and Metropoulos & Co. revived the company, ending a months-long Twinkie drought after acquiring the assets of the company formerly known as Interstate Bakeries.