Recently, Hormel Foods Corp reached an agreement to buy the famous Skippy peanut butter brand for a massive $700 million. The Spam and peanut butter makers have now joined in a deal, which helps a struggling Hormel company, according to an NBC report on Jan. 3
Hormel has been facing tough issues with increasing livestock feed costs. With the acquisition of Skippy, they should now be able to expand their horizons and reach wider global markets, like China.
In October, Unilever (consumer goods conglomerate) announced their plans to sell the Skippy brand, due to their desire to move to brands with more growth, such as Hellmann's and Dove.
Skippy was expected to receive approximately $400 million, by analysts. However, their $700 million deal exceeds previous expectations.
Capital markets analyst Jonathan Feeney released a statement that read:
"In our view, (Hormel's) management has made a very smart move in diversifying away from its animal protein core at a time when margins are likely to correct downward. This deal plugs that gap."
Skippy comes second only to J.M. Smucker Co's Jif, when it comes to annual sales. In 2011, $300 million in sales was reported and Hormel projects around $370 million this year.
Hormel Chief Executive Jeffrey Ettinger told media sources:
"(Skippy) allows us to grow our branded presence in the center of the store with a non-meat protein product and it reinforces our balanced portfolio."
The deal is the largest in Hormel's history, and Barclays will still serve as the sole financial adviser in Hormel affairs.