Wachtell, Morgan Lewis latest to benefit from Big Food consolidation as JM Smucker snaps up Hostess Brands

Deal valued at $5.6bn to buy Twinkie owner follows acquisitions by Campbell Soup and Mars

Wachtell Lipton Rosen & Katz and Morgan Lewis & Bockius are advising on JM Smucker’s acquisition of Twinkie owner Hostess Brands for $5.6bn including debt.  

The deal uniting the two major US snack makers will see Smucker acquire all of Hostess’s outstanding shares in a cash and stock transaction valued at $34.25 per share. Smucker has also agreed to assume Hostess’s roughly $900m of debt. 

A Wachtell team led by corporate department co-chair Steven Rosenblum and corporate partner Ronald Chen advised Smucker on the matter. The team also included real estate M&A counsel Mark Koenig, executive compensation and benefits partner Adam Shapiro, finance partner Gregory Pessin, tax partner T. Eiko Stange, IP of counsel Selwyn Goldberg and antitrust partner Christina Ma alongside a supporting cast of associates. 

Meantime, Morgan Lewis has acted for Hostess on the deal, with the core team made up of partners Alec Dawson (corporate), Andrew Milano (M&A) and Howard Kenny (capital markets, M&A) and associates Samuel Worth and Christopher Miller, alongside a wider team of partners and associates. 

Under the terms of the deal Hostess shareholders will receive $30 in cash and a 0.03002 share of Smucker’s stock for each share of Hostess that they owned. Smucker said the purchase price represented a premium of roughly 54% to the closing price of $22.18 on the last trading day prior to press reports in August of a potential transaction.

Smucker’s acquisition is the latest in a wave of deals by Big Food, as companies look to expand their brand portfolios as pandemic-era gains slip away.

Last month, Campbell Soup announced it was buying Rao’s sauce maker Sovos Brands for $2.7bn, with Campbell’s advised by Davis Polk & Wardwell and Sovos by Hogan Lovells and Delaware firm Richards Layton & Finger. 

And earlier in the summer M&M owner Mars said it was buying Kevin’s Natural Foods, a deal that saw Simpson Thacher & Bartlett, Covington & Burling and ArentFox Schiff advise Mars and Sheppard Mullin act for Kevin’s Natural Foods.  

Smucker’s acquisition of Hostess will end the latter’s time as a publicly-traded company. Hostess, which filed for bankruptcy in 2004 and 2012, was taken public in 2016 by entrepreneur Dean Metropoulos and private equity firm Apollo Global Management through a merger with a special purpose acquisition company. 

By the end of 2020 Hostess had refreshed its portfolio and was generating revenue of more than $1bn annually, though Reuters reported last month the company was exploring a sale to larger rivals including PepsiCo and Hershey after price hikes to boost revenue raised investor concerns over its prospects and saw it become an acquisition target. 

Shares of Hostess climbed 18% in premarket trading last Monday (11 September) on the announcement. Smucker’s stock fell 7.5%, as investors viewed the deal as too pricey. The deal is expected to close in Smucker’s fiscal third quarter, which ends in January.

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