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JM Smucker expands pet food portfolio by swallowing Ainsworth Pet Nutrition

Over the recent years, JM Smucker (SJM) — known for its branded food products — has grown substantially into a household name. With deal making and other smaller purchases, the company has become a diversified consumer empire. In 2015, the company took a plunge into another fast-growing sector – pet food market by purchasing Big Heart Pet Brands. Now the company is beefing up this division with the latest purchase of Ainsworth Pet Nutrition.

J.M. Smucker, which recently dumped its plan to acquire ConAgra Brands’ (CAG) Wesson oil brand, said it would be acquiring the manufacturer of Rachael Ray pet food, Ainsworth Pet Nutrition for $1.9 billion. Smucker is expanding its pet food portfolio with a hope that it would help strengthen the company’s sales in a slow-moving consumer-product industry.

JM Smucker acquires Ainsworth Pet Nutrition
Courtesy: Wikimedia Commons

In 2017, Smucker reported a 1% decline in revenue to due to the shift in the customers’ demand. The industry, on the whole, was seen as a sluggish and risk-averse industry. To overcome this challenge, several companies are expanding their footprint by either launching new products or venturing into new markets.

This deal is the latest addition to the recent acquisitions of pet food companies made by the company, bringing the total brands in the pet food portfolio to 15. The company plans to fund the deal with debt, excluding an expected tax benefit of about $200 million. The addition of Ainsworth pet nutrition is expected to generate net sales of about $800 million in the first year after the completion of the deal.

Apart from this acquisition, the company has also revealed plans to wrap up the U.S. baking business for which it is exploring various options. Sales from the company’s baking business, which is known for its Pillsbury brand, is expected to be $370 million in this fiscal year.

Pet food market value is expected to reach above $30.01 billion in 2022

This acquisition by Smucker comes a month after its longtime rival General Mills (GIS) displayed its interest to nab Blue Buffalo Pet Products for about $8 billion. According to a report by Zion Market Research, pet food market value is expected to reach above $30.01 billion in 2022. Major companies are venturing into the pet industry because of its massive growth potential.

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