Ainsworth Pet Nutrition LLC, the Meadville-based pet food company, is being sold to J.M. Smucker Co., the Ohio-based maker of jams, jellies, coffees and pet food, in an all-cash deal valued at $1.9 billion.
The deal was announced late Wednesday afternoon in a joint statement from the two companies and it is expected to be completed later this spring.
Ainsworth, a leading maker, distributor and marketer of premium pet food and pet snacks, has the Rachael Ray Nutrish premium brand as well as Dad's, a low price, high quality line of pet foods. Ainsworth also sells pet food and snacks under several additional branded and private label trademarks.
About two-thirds of Ainsworth's sales are generated by its Rachael Ray Nutrish brand of premium pet foods, which was launched 10 years ago. The brand line is driving significant growth in the premium pet food category, according to J.M. Smucker Co., based in Orrville, Ohio.
Smucker already makes and markets well-known brands of consumer foods and beverages, pet food and pet snacks. Those brands include Smucker's jams and jellies; Folgers, Dunkin' Donuts and Café Bustelo coffees; Jif peanut butter; Crisco, Pillsbury and Hungry Jack foods and others. In pet food and pet snacks, Smucker's brands include Meow Mix, Milk-Bone, Kibbles 'n Bits, Natural Balance and 9Lives.
"After five generations, our family, in partnership with L Catterton (a private equity firm specializing in consumer brands), made the decision to sell Ainsworth Pet Nutrition to The J. M. Smucker Co," Sean Lang, executive chairman of Ainsworth, said in a statement Wednesday afternoon.
"We took great care to find the right home for our brands and our people, to whom we are so grateful," Lang said. "The J. M. Smucker Co, also a fifth-generation family company, is led by a like-minded family to our own. We expect the combined horsepower of these pet care organizations to achieve great things."
The more than 700 Ainsworth employees will become Smucker employees as part of the transaction.
"We were in meetings today with our employees who are our Ainsworth family," Tommy Lang, retired past chairman of Ainsworth, told the Tribune on Wednesday. "We would not do this if we didn't think it was in the best interest of two groups — our customers and our Ainsworth family."
The elder Lang said the sale was in the long-term interest of the Ainsworth Pet Nutrition employees and growth of the firm.
"It's a big piece of security for those in the Ainsworth family," Lang said. "Smucker is a bigger company in about five different (consumer) segments. They (Smucker) want to increase the output of Ainsworth."
Smucker's chief executive officer, Mark Smucker, called Ainsworth Pet Nutrition "an excellent strategic fit" because the high growth of the Rachael Ray Nutrish brand compliments Smucker's own pet food portfolio.
"Their team has done a tremendous job growing this business, building Nutrish into one of the most recognizable premium pet food brands in the United States," Smucker said in a statement. "We look forward to working with the talented Ainsworth team, as we know their passion for pets runs as deep as ours."
"Smucker's decision to acquire Ainsworth Pet Nutrition validates the power of the Ainsworth company mission," said Jeff Watters, Ainsworth's president and chief executive officer.
"At Ainsworth, our goal has been to improve the lives of pet families everywhere by making high quality pet food accessible to all pet parents," Watters said. "This single-minded focus has resonated with consumers and will continue to resonate under Smucker leadership."
Celebrity chef Rachael Ray, a renowned pet advocate, also was enthusiastic about the deal.
"It has been an important goal of mine to help create pet food with the same care I use when creating my recipes, as well as a brand that has been able to donate over $27 million to help animals in need," Ray said in a statement. "So I am pleased that The J. M. Smucker Co. is committed not only to maintaining the high quality of the Nutrish brand, but continuing the philanthropic efforts of the brand through donations to The Rachael Ray Foundation, which helps those animals that are less fortunate than our own."
The all-cash transaction, which Smucker will fund with debt, is valued at $1.9 billion. That amount is prior to an expected tax benefit for Smucker related to the purchase. Smucker estimates the present value of that tax benefit at approximately $200 million.
The deal is expected to close early in Smucker's new fiscal year, which begins May 1.
The deal is subject to federal regulatory approval, Maribeth Burns, a spokeswoman for Smucker, said Wednesday.
"We have a lot of respect for the Ainsworth brands and their growth," Burns said. "We're looking forward to welcoming the 700 Ainsworth employees to Smucker. We've had our other pet brands about three years. This is an excellent and growing segment."
The addition of Ainsworth will add approximately $800 million in net sales to Smucker the first full year after the transaction closes, according to company officials.
Annual cost savings of approximately $55 million are expected to be fully realized within three years after closing, according to Smucker, with approximately $25 million in savings anticipated in the first year.
Smucker expects the addition of Ainsworth to generate earnings before interest, taxes, depreciation and amortization (EBITDA) of about $110 million the first full year after the transaction closes, excluding one-time costs. The Ainsworth addition will add about 25 cents to Smucker's adjusted earnings per share of stock.
As part of the Ainsworth purchase, Smucker said it will review other strategic options including a possible sale of its U.S. baking business.
Smucker's baking business primarily has products sold in the U.S. under the Pillsbury, Martha White, Hungry Jack, White Lily, and Jim Dandy brands, along with all relevant trademarks and licensing agreements, and Smucker's manufacturing facility in Toledo, Ohio.
Smucker said it has a 20-year, perpetually renewable, royalty-free license for the use of the Pillsbury brand name and related trademarks, which is transferable at the Smucker's discretion. Smucker said its baking business in Canada, which consists of products primarily sold under the Carnation, Eagle Brand, Five Roses, Golden Temple, and Robin Hood brands, is excluded from the review.
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Rationale behind the Ainsworth deal?
Below is the rationale behind J.M. Smucker Co.'s purchase of Ainsworth Pet Nutrition LLC, according to the two firms.
Pet food and pet snacks has become the largest center-of-the-store category in the U.S. food and beverage market, generating more than $30 billion in annual retail sales and remains one of the fastest-growing categories. The acquisition and addition of the high-growth Ainsworth's Rachael Ray Nutrish brand will increase the scale and further accelerate the growth profile of Smucker's pet food business.
Nutrish holds a leading position and is one of the fastest-growing brands in the premium dry dog food segment within the grocery and mass channels, a key growth driver for the overall category. The addition of Nutrish will significantly expand Smucker's presence in premium dry dog food area, complementing Smucker's Nature's Recipe brand.
The deal strengthens Smucker's position in dog snacks with the presence of Nutrish in fast-growth segments, including natural meats and long-lasting chews.
While Nutrish has a relatively smaller presence in premium cat food, the brand is well-positioned for significant growth in the premium cat food segment. This will help accelerate growth opportunities in the Smucker's current pet food portfolio.
J.M. Smucker Co. has five manufacturing locations for pet food and more than 30 food processing locations across North America.
Ainsworth has more than 700 employees. They are: Meadville plant and warehouse, 297 employees; Meadville headquarters 109; Greenville warehouse, 50; Wexford offices, 43; Frontenac, Kan. plant, 196; and sales, 34 (spread across the U.S.).
Did you know?
Ainsworth Pet Nutrition's history goes back to Meadville in 1933 when George "Dad" Lang's Springer spaniel had a litter of 11 pups. At the time, commercial dog food cost 5 cents a pound, and work paid 40 cents an hour. To avoid going broke feeding his new pups, George tried making his own dog food. With an old peanut roaster, he combined "DAD'S Health Wheat," a product his father was then selling, with meat meal. The result was a biscuit the dogs thrived on. The company later turned into a pet food manufacturer with national distribution.