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Hormel Food Corp.’s share price up, agrees to acquire CytoSport Holdings Inc. for $450 million

Hormel Foods Corp. made an official statement, revealing that it reached an agreement over the acquisition of CytoSport Holdings Inc. in a deal estimated at about $450 million. The takeover comes as a part of the companys strategy to expand its reach and diversify its products range on the market, adding not only Muscle Milk but also other products manufactured by CytoSport.

“Our acquisition of Muscle Milk will build upon our strength in protein, but allow us to further diversity our portfolio,” Jeffrey Ettinger, Chief Executive Officer of Hormel Foods Corp., said, cited by Bloomberg. “With Muscle Milk you get the leading share player in a significant growth category.”

According to a Hormels statement, the 2014 sales of CytoSport Holdings Inc. are expected to amount to approximately 370 million dollars. Hormel Food Corp. projected that about 5 cents per share will be added to its earnings over the financial 2015 as a result of the CytoSports takeover. The company also said that it expects the purchase, including transaction costs, to have a neutral impact to earnings in the current financial year.

The acquisition of the Muscle Milk maker is the latest in a series of deals with other food companies. In 2013 the Skippy peanut butter brand was purchased from Unilever Plc for about $700 million. Other food companies have also taken some steps to consolidation in order to bolster their presence on the market.

Hormel Food Corp. was 0.61% up to close at 49.35 dollars per share yesterday, marking a one-year change of +27.92. According to the information published on the CNN Money, the 6 analysts offering 12-month price forecasts for Hormel Foods Corp. have a median target of 50.00, with a high estimate of 55.00 and a low estimate of 48.00. The median estimate represents a 1.32% increase from the last price of 49.35.

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