March 9, 2012
The purpose of this document is to provide a valuation proposal for J.M. Smucker’s Company. Team B utilized a Sales Projection approach to determine the free cash flows for Smucker’s. We then used those values to derive the value of Smucker’s. For the time period of the analysis, Smucker’s stock was trading at $29.88 per share leading to an overall firm value of ~$882 M. Team B believes Smucker’s was undervalued by $57M and believe that the stock is worth $31.27 per share leading to an overall value of ~$939 M. A summary of our results is shown below:
Given that the market believes Smucker’s is undervalued based on our conservative model, Team B would recommend that Smucker’s be an acquisition target for an organization. Background on Smucker's
The J.M. Smucker Company is America's top producer and marketer of jams, jellies, and preserves. Operating in the United States, Canada, Great Britain, and Australia, it also manufactures and markets peanut butter, ice cream toppings, fruit drinks and syrups. The familiar corporate trademark, "With a name like Smucker's, it has to be good," alludes both to the Company's founding family and its reputation for high-quality products. Smucker’s was founded in 1897 by Jerome Monroe Smucker’s who sold his first product, apple butter, from the back of a horse-drawn wagon. The Company was incorporated in 1921, and is headquartered in Orrville, Ohio since its founding, and has been family run for four generations. The Company is also known for its insistence on independence: family members maintain a controlling interest in their namesake Company and fiercely guard their majority stake. Today, as the leading marketer and manufacturer of fruit spreads, the Company also competes in retail packaged coffee, peanut butter, shortening and oils, sweetened condensed milk, ice cream toppings, and health and natural foods beverages in the North America retail consumer products space with its family of brands including: Smucker’s, Folgers, Jif, Crisco, Pillsbury, Eagle Brand, R.W. Knudsen Family, Hungry Jack, White Lily, and Martha White in the United States, along with Robin Hood, Five Roses, Carnation, Europe’s Best, and Bick’s in Canada. In addition to these well-known brands, the Company markets products under numerous other brands, including Dunkin’ Donuts, Millstone, Dickinson’s, Laura Scudder’s, Adams, Double Fruit (Canada), and Santa Cruz Organic. The Company has four reportable segments: U.S. retail consumer market, U.S. retail oils and baking market, U.S. retail coffee market, and special markets. The Company’s three U.S. retail market segments in total comprised nearly 80 percent of the Company’s net sales and represent a major portion of the strategic focus area for the Company – the sale of branded food products with leadership positions to consumers through retail outlets in North America. The special markets segment represents sales outside of the U.S. retail market segments and includes the Company’s Canada, foodservice, natural foods (formerly beverage), and international business areas. In each of the U.S. retail market segments, the Company’s products are sold primarily to food retailers, food wholesalers, drug stores, club stores, mass merchandisers, discount and dollar stores, and military commissaries. In the special markets segment, the Company’s products are distributed domestically and in foreign countries through retail channels, foodservice distributors and operators (i.e., restaurants, schools and universities, healthcare operators), and health and natural foods stores and distributors. Goal of the Engagement
The primary goal of this project was to use sales projections and other analyses to build both pro-forma financial and cash flow (sequential valuation) statements in order to determine the appropriate valuation and share price for Smucker’s. In order to do a deeper dive, Team B also...