J.M. Smucker taps corporate bond market to fund cash portion of Hostess Brands deal

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J.M. Smucker Co. is tapping the investment-grade corporate bond market on Wednesday with a deal to finance its acquisition of Twinkies and HoHos maker Hostess Brands Inc.

The parent to food brands including Folgers, Smuckers and Meow Mix
announced the $5.6 billion cash-and-stock deal in September.

The company is planning a four-tranche deal, according to a regulatory filing, comprised of five-year, 10-year, 20-year and 30-year fixed rate notes, according to market sources. Smucker is rated Baa3 by Moody’s and BBB by S&P Global Ratings.

Proceeds of the deal will be used to fund the cash consideration of the deal, to repay debt of Hostess Brands
and its units and to pay fees relating to the deal.

The company will pay Hostess shareholders $30.00 in cash and 0.03002 J.M. Smucker shares for each Hostess share they own. That valued Hostess shares at $34.25 each, or a 21.8% premium over the prior session’s closing price when the deal was announced.

As the following charts from data solutions company BondCliQ Media Services show, Smucker’s bonds have been popular in the last 10 days with better net buying across all maturities.

The next chart shows the company’s maturity stack with $1 billion of bonds coming due in 2025.

Spreads on the company’s existing bonds are holding steady to a few basis points wider on Wednesday. The company’s 4.25% notes that mature in 2035 widened by about 20 basis points when the deal was first announced on Sept. 11.

The stock, meanwhile, was down 1.3% Wednesday, and has fallen 28% in the year to date, while the S&P 500
has gained 13.6%.

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