Hormel bulks up portfolio with purchase of Muscle Milk line


Late Monday night, Austin, Minnesota-based Hormel Foods announced plans to pay $450 million for CytoSport Holdings, the maker of Muscle Milk.

The Star Tribune reports that the deal is expected to close within 30 days. Hormel company executives will discuss the deal in a Tuesday conference call with analysts and investors.

Based in Benicia, California, CytoSport is currently owned by the family that founded it and private equity firm TSG Consumer Partners LLC. The father-and-son team of Greg and Michael Pickett started the company in 1998. The company began producing protein powder for athletes in 2000, but has expanded with the addition of ready-to-drink beverages and bars. Muscle Milk is No. 1 in the ready-to-drink protein beverage category.

“Muscle Milk products will serve as a growth catalyst for our specialty foods segment, providing this division with a leading brand in the high-growth sports nutrition category,” Hormel CEO Jeffrey Ettinger said in a statement. “The acquisition of CytoSport expands our offerings of portable, immediate, protein-rich foods, and broadens our appeal with younger consumers.”

The Wall Street Journal said the addition of the CytoSport product line gives Hormel "...a broader profile in the burgeoning market for high-protein supplements. Consumers have embraced these products as fitness and weight-loss aids."

The Journal added that sales of packaged foods with protein-related claims on their labels rose to $7.5 billion in the year that ended on Feb. 15. Research firm Nielsen said that's an increase of more than 50% from the same period four years earlier.

Bloomberg reported that Hormel forecast the acquisition to add about 5 cents a share to earnings in fiscal 2015, with a neutral impact to earnings in the current fiscal year, including transaction costs.

Hormel has continued to diversify beyond the meat-based products that built its reputation; it acquired Skippy from Unilever in 2013, paying $700 million for the No. 2-selling peanut butter line.

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