Consumer products giant Procter & Gamble said Wednesday it was spinning off its Folgers coffee business into JM Smucker Co. in a 3.3 billion dollar deal.
P&G shareholders will own 53 percent of the new business, which includes a range of Folgers products including coffee and food and Smucker's line of jams and related food items.
"The proposed transaction creates a powerful portfolio of brands and an even stronger Smucker Company with annual sales approaching five billion dollars, and greater scale that will benefit all of its businesses," the companies said in a joint statement.
"Folgers is a perfect strategic fit within our portfolio of leading and iconic North American food brands," said Tim Smucker, chairman and co-chief executive of Smucker.
"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."
AG Lafley, chairman and CEO of Procter & Gamble, said the the move enables the company to concentrate on other key personal care products ranging from diapers to detergent.
"Strategically, P&G has exited certain categories in order to focus on our core businesses and enhance the growth profile of the portfolio," he said.
"The structure and terms of this transaction deliver on the goals we stated for the separation of the coffee business from P&G."
P&G had previously sold other food brands including Jif peanut butter and Crisco shortening to Smucker in 2002.
"Smucker's core beliefs, values, and principles are very much the same as those of P&G," Lafley said. "We cannot think of a better long-term home for P&G's former coffee employees and brands than Smucker."
The transaction is expected to close in the fourth quarter of 2008, subject to customary regulatory and shareholder approvals.
The expanded Smucker Company will add over 1,250 employees in sales, marketing and other functions.
P&G will spin off Folgers to its shareholders in a tax-free transaction, with a simultaneous merger with Smucker. That will leave current P&G shareholders with 53.5 percent of Smucker shares and current Smucker shareholders the remaining 46.5 percent of the combined company.
Procter & Gamble shares rose 1.1 percent to 66.14 dollars and Smucker added 2.1 percent to 54.90 dollars.
