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J.M. Smucker - Fair Deal, As I Do Not Share All The Enthusiasm

Shares of J.M. Smucker (SJM) jumped following the announcement of the purchase of Big Heart Pet Brands. Investors like the diversification, earnings per share accretion, maintenance of the dividend policy as well as the synergies resulting from the deal.

While this is undoubtedly true, I think shares already price in a great deal of good news, as synergy estimates appear aggressive and leverage is reasonably high. For these reasons, I am more cautious, not sharing the optimism of the wider investment community.

Big Heart Pet Deal

J.M. Smucker announced that it bought Big Heart Pet Brands in a $5.8 billion deal, thereby making a big entrance in branded pet food and pet snacks. The company bought the company from a consortium led by KKR as well as AlpInvest, among others. The deal marks a successful exit for the owners who bought the original business for $5.3 billion in… Read More …