Hormel Pays $3.35B to Acquire Planters Brand

Hormel Foods Corp. just boosted its snack portfolio by agreeing to purchase the Planters brand from the Kraft Heinz Co. for $3.35 billion. The acquisition includes the Planters, NUT-rition, Planters Cheez Balls and Corn Nuts brands, and includes three dedicated production facilities in California, Arkansas and Virginia.

Hormel is a global branded food company with more than $9 billion in annual revenue across 80-plus countries worldwide.

"Planters is an iconic leading snack brand with universal consumer awareness," said Jim Snee, chairman of the board, president and CEO of Austin, Minnesota-based Hormel. "The acquisition of the Planters business adds another $1 billion brand to our portfolio and significantly expands our presence in the growing snacking space. The Planters brand enhances our portfolio built for individual and social snacking occasions, and perfectly complements our snacking brands such as Hormel Gatherings, Columbus, Justin's, Skippy, Herdez and Wholly. This acquisition also meaningfully broadens our scope for future acquisitions in the snacking space."

Snee is also focusing on helping retailers keep pace with new consumer dynamics. He told investors in January during the company’s virtual annual meeting that “over 87% of all new consumers made a repeat purchase during the pandemic, and over 75% of these new consumers made two or more purchases.”

Snee added: “We delivered strong double-digit growth in our retail brands, which led to share gains in many of the categories we compete in. Not only were our core brands highly successful in 2020, we also delivered some of our best innovation throughout the year.”

In regard to the Planters acquisition, Snee mentioned that his company's competencies in brand stewardship, revenue growth management, e-commerce, innovation and consumer insights will be key to driving growth for the Planters brand and for customers. "We also expect significant synergies as we integrate this business into our One Supply Chain and Project Orion system," he said. Project Orion is a strategic initiative intended to streamline and transform how Hormel operates as a global branded food company. 

The company will acquire Planters for $3.35 billion in cash in a transaction that provides a tax benefit valued at approximately $560 million, equating to an effective purchase price of $2.79 billion.

Planters snack nut portfolio net sales were approximately $1 billion in calendar year 2020 and are expected to grow at Hormel's long-term organic growth target. Operating margins are expected to be accretive to its grocery products business in 2022 and enhance margins and cash flows for the total company. Hormel expects to attain synergies of approximately $50 million-60 million, to be realized by 2024.

"The acquisition of the Planters branded business further demonstrates our disciplined financial approach to M&A," said Jim Sheehan, EVP and CFO of Hormel. "We expect this acquisition will responsibly leverage our balance sheet and will not compromise our disciplined capital allocation policy, especially our commitment to dividend growth."

The transaction is expected to close in the second quarter of 2021, subject to regulatory review and approval.

Citi and Credit Suisse are acting as financial advisers to Hormel, and Faegre Drinker Biddle & Reath is serving as legal counsel.