Doughboy in Smucker’s Recipe

J.M. Smucker Co. is teaming up with the Pillsbury Doughboy.

Smucker said Monday that it was acquiring Minneapolis-based International Multifoods Corp., the maker of Pillsbury baking products, Hungry Jack potatoes and pancake mix and other food brands, in a $500-million cash-and-stock deal. International Multifoods shares surged nearly 26% on the news.

The agreement calls for Multifoods shareholders to receive $25 a share -- $20 in Smucker stock and $5 in 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 on Monday, shares of International Multifoods rose $5.07 to $24.70 and Smucker shares dropped $2.61 to $49.32.

After the announcement, Merrill Lynch & Co. reduced its rating of Smucker stock from “buy” to “neutral.” Analyst Farha Aslam said, “The price Smucker’s paid is rich,” and questioned the timing.

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

The purchase includes the Canadian brands Robin Hood flour and baking mixes and Bick’s pickles and condiments.

Smucker said General Mills would retain the Pillsbury frozen and refrigerated food brands.

Combined sales of Smucker and International Multifoods are expected to exceed $2.3 billion annually.

Smucker, based in Orrville, Ohio, wanted to increase its presence in stores’ baking aisles, said Chief Executive Tim Smucker.

“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 in a conference call with analysts. “It evokes an image of family togetherness, tradition and homemade goodness.”

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 would be eliminated in the merger.

Multifoods CEO Gary Costley said the companies were 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. A 20-year licensing agreement for the Doughboy would be transferred to Smucker.

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