AUSTIN, MINN. — Justin Gold, founder of Justin’s, L.L.C., described Hormel Foods Corp. as the “perfect partner” to help scale his Boulder, Colo.-based nut butter business. Hormel, which paid $286 million for Justin’s, said the deal unlocks access to new customers and several manufacturing agreements.
|Jim Snee, president and c.o.o. of Hormel|
“The Justin’s brand gives us a great platform in natural and organic specialty nut butter spreads, the fastest growing portion of the nut butter category,” said Jim Snee, president and chief operating officer of Hormel, during a May 18 earnings call with financial analysts. “Justin’s also further balances our portfolio of brands toward younger, more health-conscious and on-the-go consumers with their pioneering squeeze packs, a portable snack that comes in all seven of Justin’s nut butter flavors.
“We intend to leverage key Hormel Foods resources in supply chain, finance and R.&D., while leaving their mission and vision unchanged. We look forward to working with the Justin’s team in Boulder, Colo., and finalizing the acquisition in the coming weeks.”
The addition of Justin’s enhances Hormel’s positioning in the nut butter category, joining its Skippy brand, which the company acquired in 2013.
“Since Justin’s was founded in 2004, the business has experienced tremendous growth,” Mr. Snee said. “Looking forward, we expect Justin’s to grow at low double-digit rates from a starting point of approximately $100 million in F.Y. 17 net sales. Justin’s will report into the grocery products segment.”
In a May 18 video statement on Facebook, Mr. Gold said of Hormel: “They love Justin’s, and they want Justin’s to continue being Justin’s.”
Hormel can “truly help scale our business in a meaningful way, around sourcing raw materials, quality, safety, expanding our distribution, you name it,” Mr. Gold explained.
|Justin Gold, founder of Justin’s|
“The goal has been to get the business to enough scale where we can find the right operational partner to help take us to the next level,” he said. “But my challenge has been can we find the right partner that not only can help us operationally (and) has an expertise in peanut butter and nut butter making, but fully believes in and supports our mission. Because I believe if you can’t find a partner in both, you risk losing everything.”
He added, “It felt like the right thing to do because everyone at my company is an owner. This is going to give us additional resources to keep growing… I’m really proud of the 39 people who work here.”
The acquisition, which is subject to the customary closing conditions, is expected to close within 60 days.
|Jody Feragen, executive vice-president and c.f.o. of Hormel|
“We estimate accretion associated with the deal to be approximately 1c for F.Y. 17,” said Jody Feragen, executive vice-president and chief financial officer of Hormel. “We expect to gain supply chain synergies that will be implemented over the next several years. We plan to finance this transaction with cash on hand and a short-term draw from our credit facility. Following the close, we will remain in a strong financial position to fund any other capital needs.”For the second quarter ended April 24, Hormel net earnings were $215,397,000, equal to 41c per share on the common stock, up 20% from $180,201,000, or 34c per share, in the same period of the previous year. Net sales were $2,300,235,000, up nearly 1% from $2,279,345,000 a year ago, reflecting gains in refrigerated foods and grocery products that were offset by declines in the company’s turkey, specialty foods and international businesses.