The J. M. Smucker Company’s SJMpreviously-announced strategic move to acquire Ainsworth Pet Nutrition, LLC, was concluded on May 14. Smucker acquired Ainsworth in a transaction worth $1.7 billion, after considering tax gains of about $200 million. The transaction was funded through a combination of term loan and commercial paper borrowings.
Significance of the Takeover
Consumers’ rising consciousness regarding the health and wellness of pets has strengthened the traction of the pet foods category. Driven by such a market scenario, building strength in this category is an appropriate strategy by Smucker. Moreover, Ainsworth is a renowned name in the premium pet foods segment with popular brands like Rachael Ray Nutrish that will fortify the company’s portfolio. Incidentally, the Rachael Ray brand accounts for about two-thirds of Ainsworth's sales.
Well, this is not the first time that Smucker has undertaken strategic efforts to strengthen its footing in pet foods. In 2015, it acquired Big Heart Pet Brand that added iconic brands such as Meow Mix and Kibbles 'n Bits. The buyout has been bolstering the company’s pet food business. Incidentally, net sales in the company’s U.S. Retail Pet Foods category inched up 2% during the third quarter of fiscal 2018, owing to improved volume/mix. These were primarily related to the Nature's Recipe brand and the company’s pet snacks portfolio. With the inclusion of Ainsworth, we expect Smucker to expand further in this category.
Apart from Smucker, General Mills Inc. GIShas also been striving to expand in this category and recently concluded the acquisition of Blue Buffalo Pet Products, Inc. Further, Amazon AMZNis also looking toward invading this category, evident from its recent launch of the Wag brand.