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J.M. Smucker to acquire Multifoods

Will get Pillsbury and Hungry Jack in $500m deal

ORRVILLE, Ohio -- The J.M. Smucker Co. is teaming up with the Pillsbury Doughboy.

Smucker said yesterday it is acquiring Minneapolis-based International Multifoods Corp., the maker of Pillsbury, Hungry Jack, and other food brands, in a $500 million cash and stock deal. Shares of International Multifoods surged nearly 26 percent on the news.

The agreement calls for Multifoods shareholders to get $25 per share in a combination of 80 percent Smucker stock and 20 percent cash. The maker of Smucker's jams and Jif peanut butter also would assume about $340 million of Multifoods' debt.

On the New York Stock Exchange yesterday, shares of International Multifoods rose $5.07, or 25.7 percent, to $24.70, while Smucker shares dropped $2.61, or 5 percent, to $49.32.

After the announcement, Merrill Lynch reduced its rating of Smucker stock from buy to neutral. In a report, analyst Farha Aslam said "the price Smucker paid is rich" and that the timing may not have been the best.

"IMC's portfolio is heavily carb focused at a time when many Americans are reducing their intake of carbohydrates," Aslam said.

The purchase also will give Smucker the Canadian brands Robin Hood flour and baking mixes and Bick's pickles and condiments.

Combined sales of the two companies are expected to exceed $2.3 billion annually.

Smucker, based in the northeast Ohio town of Orrville, wanted to increase its presence in stores' baking aisles, said Tim Smucker, chairman and chief executive.

"These brands are complementary to our own and add significantly to our market presence in North America," he said in a conference call with analysts.

"The Pillsbury brand is clearly an American icon, and the history and heritage of the brand is very similar to Smucker's Jif and Crisco," he said. "It evokes an image of family togetherness, tradition and homemade goodness."

The purchase will strengthen the company's position to be able to buy other complementary brands in the future, Smucker said.

Smucker has about 2,700 employees, and Multifoods has about 2,200. Multifoods spokesman John Seitz said it was too soon to know if any jobs will be eliminated.

Gary Costley, Multifoods chairman and CEO, said the companies are a good match.

"Smucker's experience in brand management and its demonstrated success in growing market share in center-of-the-store brands made it the right choice to take Multifoods brands to the next level of performance," he said.

Multifoods completed in November 2001 the acquisition from General Mills of the Pillsbury desserts and specialty products businesses for about $304.5 million in cash.

Smucker said General Mills retains the Pillsbury frozen and refrigerated food brands. Smucker will get the Pillsbury baking products. Costley said a 20-year licensing agreement for the doughboy will be transferred to Smucker.

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