The deal for the $1.6 billion Folgers business also includes the super-premium Millstone brand and recently launched Dunkin' Donuts brand, the latter with sales approaching $200 million. It would combine businesses of roughly equal value, as Smucker's had a market capitalization of $2.9 billion prior to the news.
The Wall Street Journal first reported the deal late yesterday.
P&G had originally planned to split Folgers off to shareholders as an independent company.
Over before it began
The move ends Jamie Egasti's run as CEO of the Folgers Coffee Co. before it technically began. Mr. Egasti, who formerly headed P&G's snacks and beverage unit, will continue running the business until the deal closes, expected in the fourth quarter.
Vince Byrd, now senior VP of Smucker's consumer market, will become president of the coffee business, said Smucker's chairman and co-CEO, Tim Smucker, on a conference call June 2. While publicly held, J.M. Smucker remains controlled by its founding family.
The coffee business has for several years underperformed P&G's long-term goal of 4-6% organic sales growth. In the past quarter, however, Folgers actually helped boost P&G's top-line results thanks to price hikes and the rollout of the Dunkin' Donuts retail brand late last year. Folgers has for several years been the leading U.S. retail coffee brand.
History repeats itself
Smucker's has a history of taking P&G's orphan brands off its hands, having purchased Jif and Crisco earlier in the decade in a similar tax-free spinoff-merger transaction and assuming leadership in the peanut butter and cooking oils categories in the process.
Smucker has become an accumulator of orphan brands from other companies, too, also owning the Hungry Jack and Carnation condensed-milk brands.
Publicis Groupe's Saatchi & Saatchi, New York handles advertising, and sibling Starcom Mediavest Group handles media buying for Folgers. Aegis Group's Carat, New York, handles communications planning, and WPP Group's Bridge Worldwide, Cincinnati, handles interactive for the brand.