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J.M. Smucker Slips on Secondary Offering by Shareholder

Zacks Equity Research
Updated

Shares of The J.M. Smucker Co. SJM slipped 0.92% in the after-market trading on Monday, after the company announced that one of its stakeholders has decided to sell shares in a secondary offering.

Ohio-based Smucker announced that Blue Holdings I LP will make an underwritten secondary offering of about 3.86 million shares. The shares to be sold represent 100% of the ownership interests attributable to the affiliates of Vestar Capital Partners. Blue Holdings had made a similar offering of 8.3 million shares in September and of 4.92 million shares in July.

It should be noted that since no shares are being sold by the company, the proceeds will go to the shareholder who made the offering. Morgan Stanley MS and Credit Suisse Group AG CS will serve as the underwriters for the offering.

Smucker had issued 17.06 million shares to the selling shareholder on Mar 23, 2015 in connection with the company's acquisition of Big Heart Pet Brands.

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San Francisco-based Big Heart Pet Brands is a leader in premium-quality, branded pet food and pet snacks. The deal has placed Smucker well in the $21 billion pet food and snacks category, one of the largest and fastest growing categories in the U.S.

The company has been undertaking acquisitions to boost its portfolio. Apart from Big Heart Pet Brands, Smucker purchased Seattle, WA-based Sahale Snacks, Inc. in early Sep 2014. Sahale snacks manufactures and markets premium, branded nut and fruit snacks.

These acquisitions have contributed significantly to the company’s revenues and earnings in the recently reported second-quarter fiscal 2016. While Sahale Sacks added slightly to the second-quarter sales, the acquisition of Big Hearts Pet Brand contributed $576.7 million. Also, the launch of Dunkin’ Donuts K-cup pods in May 2015 fueled growth. Smucker licenses Dunkin’ Donuts from Dunkin’ Brands Group, Inc. DNKN.

This coffee company was also benefited from lowered packaged coffee prices of the majority of its products sold in the U.S. The company had slashed coffee prices in July. Lower coffee costs not only resulted in lower price realization during the second quarter but also led to an increase in coffee volumes.

Currently, Smucker has a Zacks Rank #3 (Hold).

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CREDIT SUISSE (CS): Free Stock Analysis Report
 
MORGAN STANLEY (MS): Free Stock Analysis Report
 
SMUCKER JM (SJM): Free Stock Analysis Report
 
DUNKIN BRANDS (DNKN): Free Stock Analysis Report
 
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