When you hear the phrase "transformational deal," you don't usually think of a conservative, family-run company that's been in the food business for more than 100 years. But by several measures that's what the acquisition of Folger's coffee last year from Procter & Gamble Co. (NYSE:PG) has been for the J.M. Smucker Co. (NYSE:SJM).
We're reminded of this by Thursday's news that Smucker's fourth-quarter profit more than doubled thanks to the acquisition, which closed in November and was valued at about $3 billion. Smucker chairman Tim Smucker
told analysts that the coffee brand had gained share in the recession as customers trade down from gourmet java.
But the surge also reflects the sheer scale of Folger's compared to the size of Smucker's before the deal. When it
announced the transaction, Smucker's said coffee (which it didn't previously sell) would account for a pro forma 42% of company sales. That's a huge change. Smucker's said it would add around 1,250 Folger's employees, in sales, marketing, procurement and other functions.
Then there's the way the all-stock deal
was structured: as a reverse Morris Trust transaction that gave P&G shareholders a 53.5% share of Smucker's.
And yet the past was also prologue here, in the
2001 deal that saw Smucker's get Crisco and Jif from P&G. Interesting dynamic between these two old Ohio firms, both of them at once conservative and open to change. -
Kenneth Klee
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Juergen Lasowski
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