International Multifoods, a pioneer Minnesota food and agribusiness company that always lacked market muscle to compete against larger firms, agreed Monday to be bought by Ohio-based J.M. Smucker Co.
The deal, valued at $840 million in cash, stock and assumed debt, joins Multifoods' lines of Pillsbury dessert mixes, Hungry Jack and Martha White flour with Smucker family named jams, Jif peanut butter and Crisco brand baking products.
Investors gave the deal a mixed review. Multifoods shares jumped, while Smucker dropped 5 percent, as analysts feared the deal's price was too high.
And Merrill Lynch reduced its rating of Smucker stock from "buy" to "neutral," saying in a report that "the price Smucker's paid is rich," and that the deal may be ill-timed.
"IMC's portfolio is heavily carb-focused at a time when many Americans are reducing their intake of carbohydrates," the Merrill report said.
But Minnetonka-based Multifoods saw its shares jump 26 percent Monday, closing up $5.07 on the day at $24.70. The sale agreement calls for Smucker to pay Multifoods the equivalent of $25 per share, of which 20 percent will be paid in cash and 80 percent in Smucker stock. Smucker also will assume $340 million in Multifoods debt.
Tim and Richard Smucker, co-chief executives of the company founded by their family four generations ago, say they envision savings of up to $60 million annually by combining the two firms' products
Some of the cost savings, however, will come from closing Multifoods headquarters in the Twin Cities, where the company has been an anchor of the food industry for 80 years. About 50 executives and support staff work at the corporate headquarters among 240 people in various Minnetonka offices.
Multifoods was started by the Bean family as New Prague Milling Co. in 1892, and moved to Minneapolis about 30 years later. It later changed its name to International Milling Co. with the purchase of flour mills in Canada where it still is the dominant miller with its Robin Hood brand. It changed its name again 40 years ago to International Multifoods when the company went public.
Multifoods underwent a series of diversification attempts, dabbling in farm seed, smoked fish and, more recently, a vending machine food distribution business.
In 2001, it returned to consumer food, buying the Pillsbury brands of baking mix and flour products from Golden Valley-based General Mills. The Federal Trade Commission required General Mills to shed those products after General Mills acquired Pillsbury Co. in 2001, to assure competition with General Mills' Betty Crocker line of cake and dessert mixes.
The shuffle may have repositioned Multifoods as a food company, but it also shrunk the company's revenues from $1.4 billion in 1982 to about $950 million in its most recent fiscal year.
Gary Costley, a former Wake Forest University business school dean who is chairman and chief executive at Multifoods, led the company through the current metamorphosis. But he told analysts and shareholders in a conference call Monday that Multifoods lacked the size and scale to properly promote its branded products.
In an interview late Monday, Costley said he would stay with Multifoods until the deal is completed. That is expected by late June, he said.
Jill Schmidt, vice president of investor relations, said Smuckers approached Multifoods in January to explore a possible acquisition.
Smuckers said they would hire Multifoods employees and will combine the product lines for promotion in the baking and spread aisle of supermarkets. Schmidt said it is too early to know who, or how many, may transfer to the new company.Pioneer Press/Lee Egerstrom
