Hormel Foods Corp. (HRL) agreed to acquire the Skippy peanut
butter business from Unilever (UN, ULVR.LN) for about $700 million
as the meat and packaged-food producer looks to expand its
offerings and boost its sales presence in China.
"The acquisition of the Skippy peanut butter business represents
a significant opportunity for Hormel Foods," Chief Executive
Jeffrey M. Ettinger said. "It 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."
Mr. Ettinger added the fast-growing international line will also
strengthen its global presence and will complement its sales
strategy in China with the Spam brand.
Hormel said the brand, which was first introduced in 1932, holds
the No. 2 share in its category, and peanut butter is the
second-most-popular sandwich behind ham in the U.S. Skippy is also
the leading brand in China and is sold in more than 30 other
countries on five continents.
The Skippy domestic line consists of 11 varieties of
shelf-stable peanut butter products.
Total annual sales are expected to be about $370 million, with
nearly $100 million of those sales outside the U.S.
Hormel, whose brands include Spam canned pork and Dinty Moore
stew, expects the deal to modestly add to earnings in fiscal 2013.
By fiscal 2014, it sees a benefit of 13 cents to 17 cents a
share.
Hormel has generally seen improving revenue in recent periods as
cost-conscious consumers choose to eat at home more often. But
rising commodities costs and shoppers' resistance to higher prices
have pressured margins.
In November, Hormel reported its fiscal fourth-quarter earnings
rose 13% as stronger Jennie-O Turkey Store and grocery-product
sales helped to offset weakness in the refrigerated food
business.
Shares were inactive premarket and closed Wednesday at $32.01.
The stock is up 8.3% in the past three months.
Write to Lauren Pollock at lauren.pollock@dowjones.com
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