J.M. Smucker Wednesday said it would acquire the Folgers coffee business from Procter & Gamble for stock valued at $2.95 billion plus the assumption of $350 million in debt.
The deal would give P&G shareholders a 53.5 percent stake
in Smucker, which is known for its namesake jellies and jams and makes Jif peanut butter and Crisco shortening -- brands it previously acquired from Cincinnati-based neighbor P&G.
Smucker will also issue a one-time $5 per share dividend to its shareholders prior to the deal, which it called "a clear indication of the strength of the combined businesses."
Smucker said the deal would add to fiscal 2009 earnings per share by about 9 percent if the company owns Folgers the entire fiscal year, excluding merger and integration costs, but including the effect of the special dividend, Smucker said.
P&G had said in January it would spin off or split off Folgers, the largest U.S. coffee business, as it focused on higher-growth businesses such as health and beauty.
But selling to Smucker instead in a tax-free stock deal meets the goals P&G set out when it announced the divestitures of Folgers -- to maximize the after-tax value of the coffee business for P&G shareholders and minimize earnings-per-share dilution, P&G Chairman and Chief Executive A.G. Lafley said in a news release.
The addition of Folgers will add to the products Smucker brings to retailers -- allowing for more marketing options, while Folgers also is well known to consumers, Richard Smucker, president and co-chief executive of Smucker, said.