J.M. Smucker Buys Folgers for $3.3B

By Eric Newman

J.M. Smucker Co. announced today that it has acquired the Folgers coffee brand from Procter & Gamble for approximately $3.3 billion.

The addition of Folgers to Smucker's portfolio—which includes the Smucker's brand, as well as Jif, Crisco, Pillsbury and Hungry Jack—could drive net sales to about $4.7 billion for the 2009 fiscal year, according to the company. The coffee brand is estimated to bring in roughly $1 billion in annual sales.

Additionally, the transaction is expected to boost fiscal 2009 earnings per share about 9%, falling in the range of $3.45 to $3.50.

"Coffee is the perfect complement to breakfast or dessert—two areas we know a lot about," Richard Smucker, president and co-CEO of J.M. Smucker, Orrville, Ohio, said in a statement. "Like Smucker's, Jif, Crisco, and Pillsbury, the Folgers brand has exceptional equity with consumers. The addition of Folgers will also enhance our ability to reach out to consumers at retail through complementary, multi-brand merchandising activities."

Those multibrand synergies could reap an extra $80 million in sales for 2009, Smucker said. But the Folgers acquisition is not the first time that Smucker has closed a major deal with P&G, Cincinnati, Ohio. It acquired both the Jif peanut butter and Cricso labels from P&G in 2002.

P&G said the sale of Folgers was part of an initiative to refocus on the CPG company's core business. "Strategically, P&G has exited certain categories . . . Smucker core beliefs, values, and principles are very much the same as those of P&G," said A.G. Lafley, chairman and CEO of P&G, in a statement. "We cannot think of a better long-term home for P&G's former coffee employees and brands than Smucker."