The all-cash transaction is valued at $1.9 billion, prior to an expected tax benefit related to the acquisition with a present value of approximately $200 million. After factoring in the estimated tax benefit and anticipated annual cost synergies of $55 million, the purchase price represents a multiple of approximately 12 times EBITDA.
Ainsworth is a producer, distributor and marketer of premium pet food and pet snacks, predominately within the U.S. Approximately two-thirds of Ainsworth’s sales are generated by its Rachael Ray Nutrish brand, which is driving significant growth in the premium pet food category. Ainsworth also sells pet food and pet snacks under several additional branded and private label trademarks.
“Ainsworth Pet Nutrition is an excellent strategic fit for our company, as the Rachael RayTM Nutrish brand adds another high-growth, on-trend brand to our pet food portfolio,” said Mark Smucker, CEO. “Their team has done a tremendous job growing this business, building Nutrish into one of the most recognizable premium pet food brands in the United States. We look forward to working with the talented Ainsworth team, as we know their passion for pets runs as deep as ours.”
According to a related 8-K filing, Merrill Lynch, JPMorgan Chase, Bank of Montreal and PNC Bank acted as joint lead arrangers and joint bookrunners. JPMorgan Chase, Bank of Montreal and PNC Bank acted as joint syndication agents. Fifth Third Bank and Wells Fargo served as co-documentation agents
The company’s borrowings under the loan will bear interest, at the company’s option, at either a base rate or a LIBOR rate, in each case plus an applicable margin. The base interest rate for borrowings is a rate equal to the greatest of the term loan agent’s prime rate, the federal funds rate plus 0.50% and the one-month LIBOR rate plus 1.00%. The applicable margins on base rate loans range from 0.00% to 0.50% and the applicable margins on LIBOR loans range from 0.875% to 1.50%, each based on the company’s long-term unsecured debt rating.
Concurrently, Bank of America acted as administrative agent for an amendment to Smucker’s revolving credit agreement. The amendment, among other things, increased the maximum total leverage ratio permitted under the total leverage ratio covenant upon the closing of the Ainsworth acquisition.