Food company JM Smucker acquires P&G’s Folgers

Folgers' 2 to 3% annual sales growth is lower than the annual sales growth of Procter & Gamble. The company had therefore decided to sell its Folgers coffee business for US$95 billion to JM Smucker. The company has annual sales of US$1.6 billion. This acquisition, Smucker's biggest ever, will almost double the size of the company.

Smucker’s will assume about US$350 million of Folgers' debt and its current shareholders with a special pre-acquisition US$5 dividend. With the addition of Folgers, Smucker said it expects sales to increase to nearly double to about US$4.7 billion. Discounting costs from the deal, Smucker said it expects to make US$3.45 to US$3.50 per share in the fiscal year beginning July 1.

P&G last year raised the possibility of divesting slower-growing brands, and in January said it was leaning toward separating Folgers in a deal in which shareholders would have the option of exchanging P&G shares for shares in the new coffee company.

"Strategically, P&G has exited certain categories in order to focus on our core businesses and enhance the growth profile of the portfolio," said A.G. Lafley, chairman and CEO of Procter & Gamble.

The deal is expected to close in the fourth quarter.