Hormel Foods Corporation HRL recently declared that it has entered into a definitive agreement to acquire Applegate Farms, LLC (Applegate) for $775 million. Presently subject to customary closing conditions, the deal is anticipated to close within the next 60 days.
Applegate is a renowned organic and natural meat products company in the U.S. The firm offers premium-quality refrigerated deli meat products, bacons, hot dogs, traditional Italian products, breakfast sausages and other related items in the market.
Acquisition of Applegate is expected to fortify Hormel Foods’ inorganic growth trajectory. The deal would enable Hormel Foods to tap the growing market demand for organic and natural frozen food products among American consumers. This would support the company’s revenue growth in the near future.
However, even after the acquisition, Applegate would autonomously operate as a separate subsidiary of Hormel Foods’ Refrigerated Foods segment.
Hormel Foods is a premium multinational marketer and manufacturer of consumer-branded meat and food products, popular across the world for innovative strategies and superior product qualities. The Applegate acquisition comes as part of the company’s organic growth strategy. In 2015, Applegate is estimated to generate sales worth $340 million. The buyout is not likely to impact Hormel Foods’ revenues in 2015, although it is expected to add up roughly 7–8 cents to the company’s earnings per share for fiscal 2016.
Stocks to Consider
Hormel Foods currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry are Tyson Foods, Inc. TSN, Bright Horizons Family Solutions, Inc. BFAM and Boyd Gaming Corporation BYD. All the three stocks have a Zacks Rank #2 (Buy).
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