- J.M Smucker will acquire the Wesson oil brand from Conagra Brands in a $285 million all-cash transaction, according to a company statement. Smucker expects the acquisition to add annual net sales of approximately $230 million.
- Per terms of the agreement, Conagra will continue to make products sold under the Wesson brand and will assist with the company's transition for up to one year following the transaction's close. After this period, Smucker plans to consolidate Wesson production into its existing edible oils manufacturing facility in Cincinnati.
- "The addition of Wesson creates a strong complement to our Crisco brand," CEO Mark Smucker said in a company statement. "By allowing us to more efficiently use existing supply chain and go-to-market resources, this acquisition will lead to significant cost savings that can further fuel growth and innovation opportunities across the company."
This acquisition could be a significant boon to Smucker sales, which fell 5% to $1.878 billion during the third quarter of its 2017 fiscal year, compared to the same period last year. The company attributed this decline to fading consumer interest in its Folgers coffee legacy brand, but the jam maker's trendier, more premium coffee brands saw sales gains during the quarter.
The company is also leaning into its popular Smucker's Uncrustables peanut butter and jelly sandwiches to help revive sales — creating a new factory to double its manufacturing capacity of the product.
And while the Wesson edible oil brand isn't a flashy novelty product, it has been "trusted by consumers for over 100 years", according to Smucker, and could greatly bolster the company's bottom line. The company expects to receive a tax benefit of about $45 million as a result of the transaction, and the deal is expected to generate EBITDA of approximately $30 million and add $0.10 to EPS in the first full year after closing.
The sale is reflective of Conagra's transformation under CEO Sean Connolly, who was hired in 2015 before a New York hedge fund claimed a large stake in the company and began pushing for changes that would raise the company's share price.
“We continue to reshape our portfolio and focus our resources on priorities that support Conagra’s business strategy and drive value creation for shareholders,” Connolly said in a statement. “We believe the J.M. Smucker Co. will be a terrific steward of the Wesson brand.”
Since 2015, the maker of Hunt's tomato sauce and Hebrew National hot dogs has focused on newer products that yield higher profits. The company spun off frozen potato giant Lamb Weston — and the sale of its edible oils falls in line with this strategy. It will be interesting to see how this deal benefits both companies going forward, and if Conagra sells off any other businesses in the coming year.