Hormel Foods Corp., purveyor of Spam and other meat offerings, is spreading itself into peanut butter with the buyout of the 80-year-old Skippy brand, its largest acquisition ever.
The $700 million deal will make Hormel the No. 2 player in the U.S. peanut butter market. And Skippy could serve as a springboard for Hormel -- still very much a domestic food company -- into coveted international markets, particularly China.
The deal unveiled Thursday will instantly boost Hormel's international sales by 30 percent. "Skippy is truly a global brand," Hormel CEO Jeffrey Ettinger said in an interview with the Star Tribune.
Austin-based Hormel will pay cash for Skippy, which has been owned since 2000 by Unilever, an Anglo-Dutch global food giant. Skippy had been run from Unilever's New Jersey offices, but Austin will now serve as ground zero for the peanut butter brand.
The deal, which requires regulatory approval, includes Skippy production sites in Little Rock, Ark., and in China's Shandong province. Unilever, whose products include Hellmann's mayonnaise and Ragu pasta sauce, has been shopping Skippy since October, seeking to pare its food holdings.
The price tag of $700 million is "well above" media reports that Skippy would fetch around $500 million, according to a research note Thursday by Edward Aaron, an RBC Capital Markets stock analyst.
But despite the potentially rich price, investors cheered the deal. Hormel's stock closed at $33.20, up $1.19 or 3.8 percent on a down day for the market generally.
"The market is giving [Hormel] the benefit of the doubt that they can take this business, integrate it and run with it," said Ken Perkins, an analyst a Morningstar Inc.