Hormel Nears $3 Billion Deal to Buy Kraft Heinz’s Planters

Hormel Foods Corp. is nearing a deal to buy the Planters snack business from Kraft Heinz Co. in a deal valuing the peanut brand at about $3 billion, according to a person familiar with the matter.

A deal could be reached as soon as next week, according to the person,who did not want to be identified discussing the talks.

Hormel shares jumped after the Wall Street Journal reported the negotiations earlier Tuesday, with the stock closing up 3.9% in New York. Kraft Heinz fell less than 1%.

Covid-19 has boosted sales for packaged-food companies as consumers stay home and cut down on meals from restaurants -- potentially making some brands more attractive. Kraft Heinz’s revenue rose in the last three quarters, rebounding from an earlier slump.

The company, known for brands such as Velveeta cheese and Capri-Sun, has sought to shore up its operations with a multibillion-dollar cost-cut plan. Formed in a 2015 merger orchestrated by Warren Buffett and 3G Capital, Kraft Heinz has also explored divestitures in a bid to refocus on core products, agreeing in September to sell its natural cheese business to a division of Groupe Lactalis for $3.2 billion.

Some of the aging brands at Kraft that were previously expected to be considered for the auction block got another life during the pandemic, when homebound consumer turned to familiar labels and comfort foods for sustenance.

Top Seller

Planters is the top-selling brand in the U.S. in the nuts, seeds and trail mixes category, according to data from Euromonitor, but its grip has been slipping. The brand held a 22.9% share of the market in 2015, but just 16.2% last year. Nuts have been particularly vulnerable to the encroachment of private-label brands.

Hormel, meanwhile, has been hit by a decline in food-service revenue as restaurants and entertainment centers close and limit operations during the pandemic. The company sells deli meats and owns the Spam brand in addition to Skippy, and has made a number of acquisitions in recent years, including the Justin’s nut-butter brand in 2016. Its strong balance sheet gives it an opening to make acquisitions, Bloomberg Intelligence analyst Jennifer Bartashus wrote last month.

“Hormel has used M&A effectively in the past to evolve its business, and we believe this strategy may continue to unfold in 2021,” Bartashus said. “With strong cash generation and management’s statement that it could take on another $3.5 billion of debt for the right transaction, Hormel appears positioned to enhance its portfolio, gain access to new markets or aid expansion in fast-growing categories.”

©2021 Bloomberg L.P.

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