Procter & Gamble has been the proud owner of Folgers, the nation's top-selling packaged coffee brand, for 45 years. The Folgers brand is iconic and Smucker, the company that acquired it from P&G, expects to market it alongside other popular brands such as Jif and Crisco. In January, P&G announced that it would split or separate from Folgers as it focused on faster-growing segments such as health and beauty. P&G President and CEO A.
G. Lafley said in a statement that selling the business to Smucker in a tax-free stock deal meets the targets set by P&G when it announced plans to divest from Folgers: maximizing the after-tax value of the coffee business for P&G shareholders and minimizing earnings per share dilution. The deal is also better for P&G shareholders than a direct spin-off due to cost savings and other benefits Smucker can gain by combining Folgers with its existing portfolio, Lafley said during a conference call with analysts. To execute the deal, P&G will distribute Folgers to P&G shareholders, with a simultaneous merger of Folgers with Smucker.
Sales are expected to increase 6 percent annually in the long term, with gains of 8 percent, Smucker said, adding that it will continue to look for acquisitions to help drive sales. The addition of Folgers will add to the products Smucker brings to retailers, allowing more marketing options, said Richard Smucker, president and co-CEO of Smucker. Upon completion of the transaction, the expanded Smucker company will add more than 1,250 employees, including sales, marketing, coffee procurement, product development, supply chain and management functions in Cincinnati and manufacturing plants in New Orleans, Louisiana; Kansas City, Missouri; and Sherman. Texas, along with a key distribution center in New Orleans.
Smucker was advised by Banc of America Securities LLC; William Blair & Company, L. L. C., while P&G was advised by Morgan Stanley & Co. Cia.
Smucker Company owns all trademarks except that Pillsbury is a trademark of The Pillsbury Company used under license and Carnation is a trademark of Societe des Produits Nestle S. A. When the deal was closed, the Folgers entity merged with a subsidiary of Smucker, surviving as a wholly owned subsidiary of Smucker. The addition of Folgers, a billion-dollar brand, is consistent with Smucker's strategy of owning and marketing the number one food brands in North America.
The reverse structure of Morris Trust allowed Procter & Gamble to sell its Folgers business in a tax-efficient manner (distribution and merger were tax-free for Procter & Gamble and its shareholders) in a business combination transaction with a strategic acquirer. To start Folgers' new business, P&G has appointed Jamie Egosti, current president of the Coffee and Global Snacks division of P&G, CEO of The Folgers Coffee Co. Jones Day advised The Procter & Gamble Company in the divestment of its Folgers coffee business made through a reverse share transaction of Morris Trust with The J. The company has one of the strongest portfolios of leading quality and trusted brands including Pampers (R), Tide (R), Ariel (R), Always (R), Whisper (R), Pantene (R), Mach3 (R), Bounty (R), Dawn (R), Gain (R), Pringles (R), Folgers (R)), Charmin (R), Downing Y (R), Lenor (R), Iams (R), Cresta (R), Oral-B (R), Actonel (R), Duracell (R), Olay (R), Head & Shoulders (R), Wella (R), Gillette (R) and Braun (R).
By separating the coffee business as its own independent company, P&G hopes to make Folgers - North America's leading coffee retailer - the focus of its own company. In connection with that merger, the outstanding shares of Folgers were converted into Smucker shares. Under the terms of the agreement which has been approved by the boards of directors of both companies P&G will distribute Folgers to shareholders of P&G in a tax-free transaction with a simultaneous merger with Smucker. CINCINNATI supervisor & Gamble announced plans to separate its coffee department into an independent company which will be called The Folgers Coffee Co.
