Daily Management Review

Its Planters And Corn Nuts Brands Of Kraft Heinz To Be Sold To Hormel For $3.35 Billion


02/12/2021




Kraft Heinz Co. third largest food and beverage company in North America and the fifth-largest food and beverage company in the world, has finalised plans to divest its nuts business and will be selling off those businesses units, including most of its Planters and Corn Nuts products, to Hormel Foods Corp in a deal which will be worth $3.35 billion.
 
This announcement by the company propped the company’s shares by 6 per cent.
 
The Chicago, United States, based company has been facing criticism for a long time form various quarter including its shareholders of losing out market share to private label products because the company currently has business interests in too many categories and hence is unable to focus on its major brands. Analysts said that this latest move by the company is a part of its strategy to streamline its portfolio of brands and to focus on the more accretive brands.
 
The company is also selling of its natural cheese business to French dairy company Groupe Lactalis in a deal worth $3.2 billion, Kraft Heinz said in September.
 
“Planters is one of the brands most affected by private label in our portfolio. It’s also, of course, affected as a commodity,” Chief Executive Miguel Patricio said in a statement. “We must focus on areas where we see the greatest competitive advantage.”
 
It would be possible for Kraft Heinz to make large investments internally with the completion of the Planters deal, Patricio said in an interview with the news agency Reuters. The deal would also enable the company to make more acquisitions or to reduce its debt, he said. He however did not disclose any information about the specific brands that Kraft Heinz could be interested in acquiring. The company is “not in any negotiation at the moment”, he said, in reference to the acquisition questions
 
The company generated $1.1 billion to net sales in 2020 from its nuts business.
 
The company expects to close down the deal by the first half of the current year and the deal would involve global intellectual property rights to the brands, subject to existing third-party licenses.
 
The fourth quarter revenue of the company also comfortably beat estimates of analysts, the company said on Thursday as there was greater demand and sale for its packaged food products like Mac and Cheese, Heinz ketchup and Oscar Meyer meat slices from customers who were stuck at home because of the Covid-19 pandemic lockdowns in the fourth quarter in many markets.
 
“No large-cap food company has benefited more from the COVID era than Kraft Heinz, with strong non-promoted sales growth and much needed balance sheet relief,” Evercore ISI analyst David Palmer wrote in a recent note.
 
For the quarter ended December 26, the company reported a 6.2 per cent growth in its sale revenues at $6.94 billion which beat the average estimate of analysts $6.82 billion, according to Refinitiv data.
 
The company also reported a rise in its adjusted net earnings at 80 cents per share compared to 72 cents per share for the same period a year earlier which also beat analysts’ estimates of 74 cents per share.
 
(Source:www.reuters.com)