Hormel Foods Up on Meat Merger

Shares of Hormel Foods (HRL) are up more than 4% in the after-hours market after the company said it’s buying Applegate Farms for $775 million.

Closely held Applegate’s annual sales are expected to be about $340 million this year, Hormel said in a news release Tuesday announcing the deal.

A deal would follow other transactions over the past year involving protein companies. In 2014, Tyson Foods Inc. paid $7.7 billion for Hillshire Brands Co., which makes Jimmy Dean sausages, and Post Holdings Inc. bought egg and dairy-goods company Michael Foods Group Inc.

A change in consumer eating habits is underpinning consolidation in the sector. Americans are moving to more protein-heavy diets and eschewing carbohydrates, while seeking more organic products.

Hormel has been diversifying its portfolio of food brands to capitalize on growing protein demand and higher-margin foods. The company last year paid $450 million for CytoSport Holdings Inc., maker of Muscle Milk-brand protein shakes and powders, and in 2013 it acquired the Skippy peanut butter brand from Unilever PLC for about $700 million.

Buying Applegate would help Hormel appeal to consumers that increasingly are seeking organic meats, including meat from animals raised without antibiotics. Hormel mainly sells conventional meat products, while rivals including Tyson Foods Inc. and Pilgrim’s Pride Corp. have ramped up sales of antibiotic-free meats.

The deal is expected to close within two months. Applegate will operate as a stand-alone company.

Posted by on May 26th, 2015 at 4:51 pm

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