Hormel Foods ( HRL ), 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 ( UL ).
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 approval.
"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 a share.
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 shares.
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 Bachoco ( IBA ) of Mexico andTyson Foods ( TSN ).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
