Hormel to Acquire CytoSport to Expand Protein Portfolio - Analyst Blog


Meat products company Hormel Foods Corporation ( HRL ) recently announced its plans to acquire CytoSport Holdings, Inc., the renowned Muscle Milk producer. Valued at $450 million, the transaction is subject to closing within 30 days. Based in Benicia, CA, CytoSport is a partner company of the private equity firm TSG Partner Companies, LLC.

For 2014, CytoSport is expected to generate revenues of $370 million. The company deals in brands including Muscle Milk, CytoSport Monster, Cytomax and CytoSport. Muscle milk, CytoSport's most famous product has been a huge success ever since its start in 2000. Due to high demand of the protein powder, the company expanded its portfolio to ready-to-drink beverages and bars.

Hormel expects the acquisition to contribute 5 cents per share to earnings in fiscal 2015. However, earnings per share, including transaction costs in fiscal 2014 will not be affected.

Hormel intends to pursue further acquisitions in order to increase its market presence. Past acquisitions have been steadily benefiting the company through the last few quarters. These include Skippy peanut butter acquired in Jan 2013 and also Skippy's China business bought in fiscal first-quarter 2014 (ended Jan 26, 2014).

Hormel produces perishable meat products, which include fresh meat, sausages, hams, wieners and bacon; poultry products that comprise Jennie-O Turkey (JOTS) products; and shelf-stable products, including canned luncheon meats, shelf-stable microwaveable entrees, stews, chilies, hash, meat spreads, flour and corn tortillas, salsas and tortilla chips.

With a market capitalization of $13.0 billion, Hormel holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Pilgrim's Pride Corporation ( PPC ), Sanderson Farms, Inc. ( SAFM ) and The Hillshire Brands Company ( HSH ). While Pilgrim's Pride and Sanderson Farms sport a Zacks Rank #1 (Strong Buy), The Hillshire Brands holds a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: HRL , SAFM , HSH , PPC



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