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J. M. Smucker to acquire Big Heart Pet Brands for $5.8 billion

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Staff writer ▼ | February 5, 2015
The J. M. Smucker company announced it has entered into a definitive agreement to acquire Big Heart Pet Brands in a cash and stock transaction valued at approximately $5.8 billion, which includes approximately $2.6 billion of net debt.
Big Heart Pet Brands
Acquisition   The company changed its name from Del Monte Corporation
Big Heart Pet Brands is the largest stand-alone producer, distributor, and marketer of premium-quality, branded pet food and pet snacks in the United States. Its portfolio of brands includes Meow Mix, Milk-Bone, Kibbles 'n Bits, 9Lives, Natural Balance, Pup-Peroni, Gravy Train, Nature's Recipe, Canine Carry Outs, and Milo's Kitchen.

The company estimates Big Heart Pet Brands' net sales will be approximately $2.3 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will be approximately $450 million for Big Heart Pet Brands' fiscal year ending May 3, 2015.

Big Heart Pet Brands, with nearly 2,500 employees, is headquartered in San Francisco, California. The company is currently owned by a consortium of investors led by funds affiliated with Kohlberg Kravis Roberts & Co. L.P., Vestar Capital Partners, Centerview Capital, and AlpInvest Partners Inc.

The company changed its name from Del Monte Corporation to Big Heart Pet Brands following the sale of its fruit, vegetable, and other consumer foods portfolio on February 18, 2014.

The addition of Big Heart Pet Brands further strengthens the company's ability to enhance shareholder value over time. The company anticipates a full year net sales contribution of approximately $2.4 billion in fiscal 2016, with an estimated annual growth rate of four to five percent over the next several years.

The acquisition of Big Heart Pet Brands is expected to be slightly accretive to the company's fiscal 2016 earnings per share, excluding one-time costs, after giving effect to synergies and the impact of the additional common shares that will be issued to the shareholders of Big Heart Pet Brands' holding company.

With the recognition of additional synergies and anticipated growth in the pet food business, the company expects its non-GAAP earnings per diluted share to increase approximately 10 percent in both fiscal years 2017 and 2018.

The company anticipates annual synergies of approximately $200 million within the first three full years of ownership, with approximately $40 million to $50 million of the synergies expected to be realized in fiscal 2016.

The $5.8 billion transaction value represents a multiple of approximately 13 times the company's estimate of Big Heart Pet Brands' fiscal 2015 adjusted EBITDA. Following synergies, the multiple is expected to be approximately nine times.

Combined pro forma debt at closing will be approximately $6.5 billion, which is expected to result in annual interest expense of approximately $200 million. Combined pro forma amortization expense will be approximately $225 million annually.


 

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