In a reverse transaction valued at around $3.3 billion, Procter & Gamble Co will merge the 150-year old retailer of packaged coffee products, Folgers, to The J M Smucker Company in a tax-free all-stock deal. The deal includes the assumption of nearly $350 million in Folgers debt. Smucker will also issue a one-time $5 per share dividend to its shareholders. On completion of the deal, P&G will hold nearly 53.5 per cent of Smucker.

Smucker sells Pillsbury baking products and Hungry Jack pancakes along with several other brands, along with its own jams and jellies. The companies say if Smucker owns Folgers for all of 2009, the combined company anticipates $4.7 billion in annual sales.

In August 2007 P&G had outlined plans to divest the slow-growth businesses to a strategic acquirer rather than a private equity firm. Though the businesses to divested were not identified, analysts widely believed Duracell batteries, Braun appliances, Pringles potato chips, and Folgers would be on axed P&G's portfolio.

P&G has even earlier divested brands not in line with its growth strategy; Earlier in 2001 it had sold Smucker its Crisco shortening and Jif peanut butter brands for around$750 million in shares, followed by the sale of  Sunny Delight and Punica juice-based drinks to PE firm J W Childs Associates LP in 2003 and the Pert Plus shampoo line and Sure deodorant brand to buyout shop  Najafi Cos, in 2006.

"Strategically, P&G has exited certain categories in order to focus on our core businesses and enhance the growth profile of the portfolio," said A.G. Lafley, Chairman of the Board and Chief Executive Officer of Procter & Gamble. "The structure and terms of this transaction deliver on the goals we stated for the separation of the coffee business from P&G. This transaction maximizes the after-tax value of the coffee business for P&G shareholders and minimizes earnings per share dilution."

"Smucker has proven to be an excellent steward of Jif and Crisco since taking ownership of the brands from P&G in 2002 and I am confident that Folgers will continue to thrive as part of The J. M. Smucker Company," added Lafley. "Smucker's core beliefs, values, and principles are very much the same as those of P&G. We cannot think of a better long-term home for P&G's former coffee employees and brands than Smucker."

For smucker, the Folgers transaction is in keeping with its plans to be the top food brands in North America and enables it to acquire the leading ground coffee brand in the US.

 "Coffee is the perfect complement to breakfast or dessert - two areas we know a lot about," said Richard Smucker, president and co-chief executive officer of Smucker. "Like Smucker's, Jif, Crisco, and Pillsbury, the Folgers brand has exceptional equity with consumers. The addition of Folgers will also enhance our ability to reach out to consumers at retail through complementary, multi-brand merchandising activities. We are excited about the addition of Folgers and the many dimensions this transaction brings in our quest to meet and exceed consumer expectations."

Tim Smucker, chairman and co-chief executive officer of Smucker, said, "Folgers will become our tenth number one brand in North America and will further enhance the high quality, great tasting, diverse product offerings that consumers expect from Smucker. Since adding Jif and Crisco in 2002, we have continued to expand our portfolio by completing ten brand acquisitions. We have developed a core competency of integrating our acquisitions in a timely fashion and growing the brands. As an example, Jif has experienced an annualised sales growth of 7 per cent, increased its share of market by 7 share points, and introduced a variety of new products."