Hormel Foods (
), the maker of Spam and other food products, jumped to a new
high Thursday after announcing plans to buy the Skippy peanut
butter business fromUnilever (
The $700 million deal will help Hormel diversify away from
meat products and expand into overseas markets such as China,
where Skippy is the leading peanut butter brand. The acquisition,
to be financed mostly through cash, requires regulatory
"It reinforces our balanced portfolio," Hormel CEO Jeffrey
Ettinger said in a statement. "The fast-growing international
line will also strengthen our global presence."
Skippy is expected to generate annual sales of about $370
million, including nearly $100 million from outside the U.S. The
acquisition should add 13-17 cents per share to profits in fiscal
2014, Hormel said.
Hormel's profit rose 7% in the fiscal year ended in October to
$1.86 a share. It was the fourth straight rise in annual
earnings. Profit for fiscal 2013 is expected to grow 4% to $1.94
Hormel jumped as much as 6% intraday to a record-high 33.82
before paring the gain. The stock is up 14% over the past year,
roughly in line with the S&P 500.
The Austin, Minn.-based company in November boosted its
quarterly dividend by 2 cents, or 13%, to 17 cents a share
payable on Feb. 15 to shareholders of record on Jan. 21. That
brings the annual dividend yield to 2%, just shy of the S&P
500 average of 2.1%.
Hormel has paid a quarterly dividend without interruption
since going public in 1928.
The company's sales and profit growth have been slow, but the
three-year earnings stability factor is 4 on a scale of 0 to 99,
with 0 being most stable.
Also, the stock's Accumulation-Distribution Rating is B+,
above the neutral C, suggesting healthy demand for the
However, Hormel warned in November that rising grain prices
could crimp profits in 2013.
Hormel is in the Food-Meat Products industry group, which was
No. 60 out of 197 as of Thursday's IBD. The stock's 85 Composite
Rating is third in the group behind thinly tradedIndustrias
) of Mexico andTyson Foods (