Hormel Makes Largest Acquisition Ever with $850M Deal
November 2, 2017
Hormel Foods Corp. announced its largest acquisition to date, paying Arbor Investments $850 million for premium deli meat and salami company Columbus Manufacturing Inc.
This deal is the third for Hormel so far this year after two deals announced in August – a $425 million deal for Fontanini Italian Meats and Sausages, and a $104 million deal for Brazilian meat company Cidade do Sol.
Based in the Bay Area of California, Columbus – which makes deli meats, various types of salami, and Italian specialty meats – labels its brand as ‘millennial focused”, aligning its marketing efforts toward young consumers who are seeking out artisanal products well suited for a charcuterie plant.
“There is a craft mentality in the production of these products. That’s what today’s consumer is looking for,” Jim Snee, chief executive of Hormel, told investors on a conference call, reports the Star Tribune.”The products have a very premium look, very premium feel. That’s really why we think this is such a great acquisition.”
Not only will the addition of Columbus give Hormel greater exposure at the premium deli counter, one of the fastest-growing segments in the food retail space, but also brings snack products and convenience products to Hormel’s table with its prepackaged salami and cheese plates and charcuterie platters.
Hormel is not alone in its move to add a millennial-identifying meat snack company to its arsenal.
Protein is increasingly becoming a central dietary principle for consumers across many developed markets. Meat consumption in the U.S. jumped by 5 percent in 2015 – the largest increase in 40 years, according to a report by Rabobank Food & Agribusiness Research and Advisory Group. Consequently, consumers are more often opting for snack foods as health plays a greater role in food choices, and younger consumers blur the lines between snacking and formal meals, reports Food Dive. Today, 24 percent of all snack foods are eaten during meal times, according to a report issued by The NPD Group, compared to 21 percent five years ago – a trend that is expected to continue, with expectations that the trend will increase by another 12 percent.
In March of this year, Conagra Brands announced it had agreed to acquire Thanasi Foods, a protein-based snack manufacturer, and maker of Duke’s® meat snacks and BIGS Seeds, for an undisclosed amount.
This deal adds Duke’s® and BIGS to Conagra’s portfolio that already includes Slim Jim snacks, David Seeds, and Chef Boyardee, strengthening Conagra’s presence in the protein snack segment.
One month later, German private equity firm Deutsche Beteiligungs (DBAG) made a double acquisition to advance its goal of gaining a key position in the European chilled meats and ready-made snacks sectors – acquiring 90 percent stakes in Abbelen, the leading producer of chilled meatballs and ready-made burgers in Germany, and Oscar Mayer, a leading UK producer of ready meals and snacks through its newly launched buyout fund, DBAG Fund VII.
And last year General Mills agreed to acquire premium meat snack company EPIC Provisions, a Texas-based producer of meat-based protein bars from ingredients sourced from antibiotic and hormone-free chicken, turkey, pork, bison, lamb, and grass-fed beef; and Hershey acquired Krave Pure Foods – another premium jerky maker that Hershey told Bloomberg could become a brand worth $500 million. Private equity firm Wind Point Partners announced it had agreed in partnership with PepsiCo executive Jose Luis Prado to acquire Chicago-based Evans Food Group, a maker of branded and private label pork rinds and salty snacks. Also, Jack Link’s Protein Snacks announced it had agreed to acquire the meat snack division of Grass Run Farms, a collective of American family farms that produce 100 percent grass-fed beef and beef snack.
Reflecting the rising prominence of this category, and the hunger for smaller niche protein producers, is the fact that Hormel Foods paid four time the reported $213 million that Arbor Investments paid when it acquired Columbus in 2012 from Endeavour Capital.
While under its ownership, Arbor Investments invested $61 million into Columbus, reports the Chicago Tribune, upgrading its plants and equipment, and reinventing the company’s leadership team to create a business that is seen as the “Gucci of premium deli meats”, Gregory Purcell, co-founder and CEO of Arbor Investments, said.
“The acquisition of Columbus will serve as a catalyst for uniting all our deli businesses into one customer-facing organization,” said Snee. “This acquisition significantly enhances our scale in the deli by broadening our portfolio of products, customers, and consumers. The synergies we can unlock with this acquisition are clear and I’m excited for the next evolution of our company.”
Columbus will continue to operate from its current location and will be rolled into Hormel’s Refrigerated Foods segment. The company, which has total annual sales of about $300 million and is expected to experience more than 5 percent growth, will continue to operate from its current location and is expected to be “modestly accretive to earnings per share in fiscal 2018.”
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