Cincinnati-based Procter & Gamble (P&G) announced its intention to spin off or sell Folgers in January due to the brand's annual growth being lower than the corporate target of 4 to 6 percent. 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 that P&G set when it announced plans to divest from Folgers, to maximize the after-tax value of the coffee business for P&G's shareholders and minimize earnings-dilution per share.
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 8 percent, Smucker said, adding that it will continue to seek 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. Inc. Smucker Company is the owner of 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.
This press release contains certain forward-looking statements that subject to risks and uncertainties that could cause actual results to differ materially. These include statements on estimates of future earnings and cash flows and expectations regarding the closing of the transaction. Other uncertainties include, but are not limited to, general economic conditions within the U. S.
The Procter & Gamble Company has made a strategic decision to spin off or sell Folgers due to its annual growth rate being lower than their corporate target of 4-6%. Lafley stated that selling Folgers to Smucker in a tax-free stock deal would maximize the after-tax value for P&G's shareholders and minimize earnings-dilution per share. This deal is more beneficial for P&G shareholders than a direct spin-off due to cost savings and other advantages that Smucker can gain by combining Folgers with its existing portfolio. To carry out this transaction, P&G will distribute Folgers to their shareholders while simultaneously merging it with Smucker's business.
Sales are projected to increase 6% annually in the long term with gains up to 8%, according to Smucker's statement. They also plan on continuing their search for acquisitions that will help drive sales even further. The addition of Folgers will provide more marketing options for retailers as it adds more products from Smucker's portfolio. Upon completion of this transaction, Smucker's company will add over 1,250 employees including sales representatives, marketers, coffee procurement personnel, product developers, supply chain managers and other management functions located in Cincinnati as well as manufacturing plants in New Orleans (LA), Kansas City (MO) and Sherman (TX).
Smucker was advised by Banc of America Securities LLC; William Blair & Company L. C., while P&G was advised by Morgan Stanley & Co Inc. All trademarks are owned by Smucker except for Pillsbury which is owned by The Pillsbury Company under license and Carnation which is owned by Societe des Produits Nestle S. A.
This press release contains certain forward-looking statements that are subject to risks and uncertainties which could cause actual results to differ materially from those stated here. These include statements on estimates of future earnings and cash flows as well as expectations regarding the closing of this transaction. Other uncertainties include but are not limited to general economic conditions within the U. S.
