More than a century after Jerome Monroe Smucker founded his company, Smucker family members are still making smart financial decisions. Going public in 1959 provided money for growth through investments in product development and other activities. More recently, the firm issued corporate bonds during periods when interest rates were low, keeping long-term borrowing costs low while building Smucker’s cash position so that it could make timely acquisitions whenever it spotted good opportunities. Looking ahead to expansion in China, Smucker has made an equity investment in a leading local oatmeal company. What Smucker learns from this company’s knowledge of the market will pave the way for higher sales of its North American products in Asia, as well as the possibility of developing and manufacturing new foods specifically for China. Questions 1. Why would Smucker prefer to issue more than $1 billion in bonds over 18 months, rather than issuing common or preferred stock? 2. What do you think of Smucker’s deal to spread $50 million in payments to Sara Lee over 10 years after paying $350 up front for the liquid coffee concentrate business? Explain your answer.
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