ORRVILLE, Ohio – The J.M. Smucker Company signed a definitive agreement to acquire Meadville, Pennsylvania-based Ainsworth Pet Nutrition for $1.7 billion after an estimated tax benefit of $200 million.
Smucker expects to close the transaction early in the company’s fiscal year beginning May 1, 2018. The transaction is subject to customary closing conditions and regulatory approvals.
Ainsworth is a leading producer, distributor and marketer of premium pet food and pet snacks under the Rachael Ray Nutrish, Dad’s and Better Than! brands. The Nutrish brand accounts for roughly two-thirds of the company’s sales. Ainsworth also sells pet food and pet snacks in the private label segment.
“Ainsworth Pet Nutrition is an excellent strategic fit for our company, as the Rachael Ray Nutrish brand adds another high-growth, on-trend brand to our pet food portfolio,” CEO Mark Smucker said in a statement. “Their team has done a tremendous job growing this business, building Nutrish into one of the most recognizable premium pet food brands in the United States. We look forward to working with the talented Ainsworth team, as we know their passion for pets runs as deep as ours.”
Smucker intends to finance the all-cash transaction with debt. The total transaction is valued at $1.9 billion excluding an expected tax benefit related to the acquisition with a present value of approximately $200 million, the company said. The purchase price for Ainsworth represents a multiple of approximately 12 times earnings before interest, taxes, depreciation, and amortization (EBITDA) after including the estimated tax benefit and anticipated annual cost synergies of $55 million.
For Smucker, the addition of the Nutrish brand is expected to strengthen Smucker’s current portfolio of pet food while expanding Smucker’s presence in the fast-growing premium pet food category, specifically long-lasting chews and natural meats. Rachael Ray’s Nutrish is one of the fastest-growing brands in the premium dry dog food segment with the grocery and mass retail channels and is known as a leading growth driver for the overall category, Smucker explained.
The Nutrish brand also is well-positioned for significant growth in the premium cat food segment, Smucker said, which will help accelerate opportunities for Smucker’s current pet food portfolio.
“It has been an important goal of mine to help create pet food with the same care I use when creating my recipes, as well as a brand that has been able to donate over $27 million to help animals in need,” Rachael Ray said in a statement. “So, I am pleased that The J. M. Smucker Company is committed not only to maintaining the high quality of the Nutrish brand but continuing the philanthropic efforts of the brand through donations to The Rachael Ray Foundation, which helps those animals that are less fortunate than our own.”
Smucker added that the company expects to incur approximately $50 million in one-time costs related to the deal, the majority of which Smucker expects to be cash charges. The company expects to recognize approximately two-thirds of the one-time costs in the first year after closing the transaction.
Smucker anticipates the Ainsworth acquisition to contribute sales of approximately $800 million in the first full year after closing the deal. Approximately $25 million of the $55 million annual cost synergies are expected in the first year.
Included in the transaction are two manufacturing facilities in Meadville and Frontenac, Kansas, and a leased distribution facility in Greenville, Pennsylvania. Ainsworth employs more than 700 workers.
Not included in the transaction are two manufacturing facilities that primarily are used for contract manufacturing services to third-party pet food distributors.
“After five generations, our family, in partnership with L Catterton, made the decision to sell Ainsworth Pet Nutrition to The J. M. Smucker Company,” Ainsworth Executive Chairman Sean Lang said in a statement. “We took great care to find the right home for our brands and our people, to whom we are so grateful. The J. M. Smucker Company, also a fifth-generation family company, is led by a like-minded family to our own. We expect the combined horsepower of these pet care organizations to achieve great things.”