Hormel agrees deal for Applegate

Hormel agrees deal for Applegate

Hormel Foods has entered an agreement to acquire US organic meat group Applegate Farms for around US$775m.

The deal enables Hormel to expand in the growing natural and organic sector. "A growing number of consumers are choosing natural and organic products. This deal allows us to expand the breadth of our protein offerings to provide consumers more choice," said chairman, president and CEO Jeffrey Ettinger.

The agreement comes three months after reports Hormel was in the late stages of talks to buy Applegate.

According to Hormel, Applegate is the "number one" natural and organic value-added prepared meat company in the US. Applegate sells a variety of natural and organic meat products including deli meats, hot dogs, bacon, sausages, frozen breaded chicken and pre-packed lunch kits. There are more than 140 Applegate products sold in stores nationwide.

It is expected the business will generate annual sales of around $340m this year. Hormel said the acquisition will be earnings neutral this year and accretive by seven to eight cents per share in fiscal 2016.

Applegate will operate as an independently-operated, stand-alone subsidiary of Hormel. Founder Stephen McDonnell will continue to serve as an advisor to the group while CEO Kerry Collins will remain with the business for the next "several months". The company's headquarters will stay in Bridgewater, New Jersey, and all employees will be retained, Applegate said.

Applegate stressed its ethos and commitment to natural food and supply chain transparency will remain unchanged.

"Applegate's consumers won't see any changes," said Collins. "Our products, standards, mission and focus will remain the same. We're going to continue to make noise to change the food system for the better. When Applegate first started, there were only a handful of antibiotic-free animal farms, and today we work with nearly 1,800 family farms. With Hormel Foods as a partner, Applegate can share our expertise on a much wider scale."

"Applegate will continue to support labelling and transparency on genetically engineered foods, limiting the use of antibiotics in animal agriculture, and advocating for the advancement of humane standards," said Gina Asoudegan, Applegate's senior director of mission. "As a company, Applegate will continue to lead the way in searching for solutions on issues like non-GMO feed for naturally raised livestock and raising the bar on animal welfare."

The deal is subject to customary closing requirements and regulatory approval. It is expected to close within 60 days.