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Hormel Foods Buys Skippy Peanut Butter, Shares Jump

It hopes to build on Skippy's popularity in China


Hormel Foods (NYSE:HRL) is taking the plunge into peanut butter. The processed meat giant has agreed to purchase the Skippy peanut butter brand from Unilever (NYSE:UL) in a deal worth $700 million.

News of the deal sent Hormel share surging almost 5% in Thursday morning trading, while Unilever shares slipped about 1%.

Top Food Trends for 2013
Top Food Trends for 2013

The acquisition is expected to boost Hormel’s earnings by between 13 cents and 17 cents a share by 2014, Bloomberg notes. Included in the deal are Skippy production plants in Arkansas and China.

Skippy, which offers 11 varieties of peanut butter, generated $370 million in sales last year. It is the second-ranked U.S. peanut butter brand behind J.M. Smucker‘s (NYSE:SJM) Jif, but is the market leader in China. Skippy produces $100 million in annual sales in overseas markets.

Hormel said it will leverage Skippy’s popularity in China to build sales of its Spam line of products, which are positioned as an “upscale treat” for Chinese consumers.

In October, reports indicated that Unilever had hired Lazard (NYSE:LAZ) to find a buyer for Skippy, which was then estimated to be worth up to $400 million. A number of other companies, including ConAgra (NYSE:CAG), which makes the third-ranked U.S. peanut butter brand, Peter Pan.

Article printed from InvestorPlace Media,

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