ORRVILLE & CINCINNATI, Ohio -- The J. M. Smucker Co. and The Procter & Gamble Co. have signed an agreement to merge the Folgers coffee business into Smucker in an all-stock reverse Morris Trust transaction valued at approximately $3.3 billion, including the assumption of an estimated $350 million of Folgers debt. Folgers is a leading producer of retail packaged coffee products in the United States. Folgers' portfolio of products is sold primarily under its flagship Folgers brand. This brand joins a portfolio of brands that include Smucker's, Jif, Crisco, Pillsbury, Eagle Brand, Hungry [image-nocss] Jack, Robin Hood and Bick's.
"Strategically, P&G has exited certain categories in order to focus on our core businesses and enhance the growth profile of the portfolio. The structure and terms of this transaction deliver on the goals we stated for the separation of the coffee business from P&G. This transaction maximizes the after-tax value of the coffee business for P&G shareholders and minimizes earnings per share dilution," said A.G. Lafley, chairman and CEO of Procter & Gamble, Cincinnati.
"Smucker has proven to be an excellent steward of Jif and Crisco since taking ownership of the brands from P&G in 2002, and I am confident that Folgers will continue to thrive as part of [Smucker]," added Lafley. "Smucker's core beliefs, values, and principles are very much the same as those of P&G. We cannot think of a better long-term home for P&G's former coffee employees and brands than Smucker."
The proposed transaction creates a powerful portfolio of brands and a Smucker with annual sales approaching $5 billion, and greater scale that will benefit all of its businesses. With the addition of Folgers, the total size of the categories in which Smucker participates increases to approximately $15 billion as compared to $1 billion in 2002.
"Folgers is a perfect strategic fit within our portfolio of leading and iconic North American food brands," said Tim Smucker, chairman and Co-CEO of Smucker. "Folgers will become our tenth No. 1 brand in North America and will further enhance the high quality, great tasting, diverse product offerings that consumers expect from Smucker."
Richard Smucker, president and Co-CEO of Smucker, said, "Like Smucker's, Jif, Crisco and Pillsbury, the Folgers brand has exceptional equity with consumers. The addition of Folgers will also enhance our ability to reach out to consumers at retail through complementary, multi-brand merchandising activities."
Folgers' most famous advertising slogan was "the best part of waking up is Folgers in your cup!" One of its best-known campaigns involved the iconic "Mrs. Olson," a Swedish neighbor to many of the campaign's other characters, who recommended a cup of Folgers coffee as a solution to all of their problems. She also invariably reminded her listeners that Folgers was "mountain grown, the richest kind of coffee." Actress Virginia Christine (pictured) portrayed Mrs. Olson in TV ads from 1965 to 1986.
Under the terms of the agreement, which has been approved by the boards of directors of both companies, P&G will distribute Folgers to P&G shareholders in a tax-free transaction, with a simultaneous merger with Smucker. P&G expects the Folgers separation to occur via a split-off and plans to finalize the transaction structure in the early fall of 2008. In the merger, current P&G shareholders will receive approximately 53.5% of Smucker shares and current Smucker shareholders will own approximately 46.5% of the combined company upon closing. Upon closing, Smucker will have approximately 118 million shares outstanding. As part of the transaction, Smucker will be assuming an estimated $350 million of Folgers debt. The transaction is expected to be tax-free to both companies and P&G shareholders. In addition, Smucker shareholders as of the record date, prior to the merger, will receive a special dividend of $5 per share. The record date for the special dividend will be determined by Smucker at a future date.
As part of the transaction, Smucker will issue a one-time special dividend of $5 per share to Smucker shareholders as of the record date, prior to the merger, a clear indication of the strength of the combined businesses. Following this one-time special dividend, P&G shareholders will receive approximately 53.5% of Smucker in a tax-free stock-for-stock merger.
The transaction is expected to close in fourth-quarter 2008, subject to customary closing conditions including regulatory and Smucker shareholder approvals. Smucker expects to incur approximately $100 million in one-time costs related to the transaction over the next 12 to 24 months.
Following completion of the transaction, the expanded Smucker will add more than 1,250 employees including sales, marketing, coffee procurement, product development, supply chain and administrative functions in Cincinnati and manufacturing plants in New Orleans; Kansas City, Mo.; and Sherman, Texas, along with a key distribution center in New Orleans.
Orrville, Ohio-based Smucker is a leading marketer and manufacturer of fruit spreads, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods beverages in North America. Its family of brands includes Smucker's, Jif, Crisco, Pillsbury, Eagle Brand, R.W. Knudsen Family, Hungry Jack, White Lily and Martha White in the United States, along with Robin Hood, Five Roses, Carnation, Europe's Best and Bick's in Canada.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.