St. LOUIS — Post Holdings Inc. is acquiring several pet food brands and manufacturing assets from The JM Smucker Co. for about $1.2 billion. The acquisition will give Post Holdings a compelling entry point into the growing pet food category, according to the company.
Brands to be acquired include Rachael Ray Nutrish, Nature’s Recipe, 9Lives, Kibbles ‘n Bits and Gravy Train. The brands combined generated sales of $1.5 billion in the year ending April 30, 2022, according to The JM Smucker Co.
In an Investor Day presentation on December 14, 2022, Tucker Marshall, chief financial officer of The JM Smucker Co., told investors that the company’s pet snacks category makes up 33% of total sales in fiscal 2022, while cat food represented 32% of sales and dog food accounted for 31%. Marshall added that the company aims to take its pet snacks business to $1 billion in sales and beyond, with its Milk-Bone brand leading the pack.
“We have a market-leading position with a 23% dollar share in the dog snack category and more than 60% of dog-owning households treat at least one of our brands,” said of Marshall to investors. “…We want to continue our premium innovation launches and enter new subcategories… I am very confident on our path to $1 billion.”
The divestiture excludes The JM Smucker Co.’s Meow Mix brand, which has driven strong growth in 19 of the last 20 consecutive quarters and is No. 1 in the dry cat food market, according to the company.
Once the acquisition is completed, Post Holdings plans to create a new pet food platform within Post Consumer Brands. Nicolas Catoggio will continue in his role as president and chief executive officer of Post Consumer Brands and will see his responsibilities expand to include management of North American ready-to-eat cereal and peanut butter, as well as new business in pet food
Shared by JM Smucker Co. some of its employees will move to new roles at Post Holdings to support the company’s new pet food business. The manufacturing assets to be included in the deal are processing plants in Lawrence, Kan., and Meadville, Pa., and distribution facilities in Bloomsburg, Pa.
“We expect this acquisition to continue our history of creating value with a buy-and-build approach across categories,” said Robert V. Vitale, president and CEO of Post Holdings. “These iconic brands are well suited to this strategy.”
Post Holdings management expects the acquisition to contribute approximately $100 million to adjusted EBITDA in the 12 months following the closing of the acquisition and before the realization of cost synergies, which the company expects to be $30 million annually in the third full fiscal year following closing. , resulting from economies of scale in logistics, procurement and administrative services.
“This divestiture supports our strategy to prioritize investments and resources in the areas of our business that offer the strongest growth and revenue potential,” said Mark Smucker, president and CEO of The JM Smucker co. “In our pet business this is reflected in our focus on dog snacks and cat food, anchored by our Milk-Bone and Meow Mix brands, respectively.
“Portfolio optimization and strategic resource allocation remain key drivers of our long-term growth,” added Smucker. “Implementing this proven strategy has helped us streamline our business, improve margin mix, and position the company to deliver continued shareholder value.”
The transaction, subject to closing conditions, is expected to be completed in the second quarter of calendar year 2023.
The divestiture follows two others by The JM Smucker Co. in the past two years. In December 2021, the company sold its private label dry pet food business to Diamond Pet Foods, a transaction valued at approximately $33 million. In February 2021, the company sold its Natural Balance brand to Nexus Capital Management for approximately $50 million.
