- Hormel Foods, Inc. has announced it is acquiring Applegate Farms, the top natural and organic meats producer in the U.S., for $775 million, Hormel's largest acquisition ever.
- Applegate will be an independently operated, stand-alone subsidiary.
- This acquisition is a part of Hormel's diversification strategy, in this case into the "holistic product area," Hormel CEO Jeffrey M. Ettinger said. Within about 60 days, the acquisition should close, according to a news release.
According to Ettinger, with this acquisition, Hormel will add meats, but there was little overlap between the two companies' lineups of products, The New York Times reported. Applegate sees half of its sales from organic and natural foods stores, whereas Hormel does not sell products in that retail segment. Applegate has begun fostering a presence in traditional grocery stores, but Hormel intends to speed up that process. Also, Hormel carries few organic products: one variety of Wholly Guacamole and certain varieties of Muscle Milk.
The deal is not expected to contribute a significant amount to Hormel's sales, as, according to Fortune, "Applegate’s annual sales are expected to reach $340 million in 2015, a sliver of the roughly $9.3 billion Hormel records annually." Regardless, this acquisition is the latest example of a major company buying out a smaller rival, and in several cases, these have been rivals that are in the natural and organic foods categories.
While Hormel and its Jennie-O Turkey Store brand have been negatively impacted by the bird flu, Applegate has not seen any issues as of yet with the virus, which is another selling point for Hormel. Hormel reported in recent earnings a lower end earnings guidance prediction for the year amid bird flu concerns.