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JM Smucker has announced a definitive agreement to divest its Cloverhill and Big Texas brands, along with select private label products, to JTM Foods.

The all-cash deal, valued at approximately $40 million, includes the transfer of relevant trademarks and licenses, as well as the company's manufacturing facility located in Chicago, Illinois. This transaction is expected to affect around 400 employees, who will transition to JTM Foods.

This divestiture aligns with Smucker's ongoing efforts to optimize its portfolio and streamline operations within its Sweet Baked Snacks segment.

Dan O'Leary, senior vice president and general manager of sweet baked snacks and pet, said: "This divestiture reflects our continued commitment to portfolio optimisation to prioritise resources to support the execution of our Sweet Baked Snacks strategy, focused on growing the Hostess brand, and advancing our leadership in the sweet baked goods category. This decision continues the ongoing work to ensure our manufacturing network is optimised to mitigate costs and reduce complexity."

The brands being divested generated net sales of approximately $30 million for the fiscal year ending April 30, 2024, following their acquisition in November 2023. For the current fiscal year, Smucker anticipates that the divested products will account for approximately $60 million in net sales.

The company expects the divestiture to have an immaterial impact on its adjusted earnings per share for the full fiscal year. Proceeds from the sale will be directed towards reducing the company's debt load. Smucker plans to provide further insights into the transaction’s financial implications during its upcoming third-quarter earnings release.

The transaction is projected to close in the fourth quarter of Smucker’s fiscal year, which ends on April 30, 2025. RBC Capital Markets is serving as the financial advisor for the deal, while Benesch, Friedlander, Coplan & Aronoff is providing legal counsel.

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