Stocks continued last week's rally on Monday, fueled by optimism that the Republican tax bill will pass. The Dow Jones Industrial Average (^DJI 0.23%) -- now up over 25% for the year -- and the S&P 500 (^GSPC -0.16%) both gained over half a percentage point, posting record highs.
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Snack food makers were in the spotlight today, with two such companies getting swallowed up by old-school, growth-challenged food giants. The Hershey Company snapped up Amplify Snack Brands (BETR), and Campbell Soup seized on Snyder's-Lance (LNCE).
A sweet deal for Amplify Snack Brands
Shareholders of Amplify Snack Brands got an early Christmas present when it was announced that Hershey will be acquiring the maker of SkinnyPop and Tyrrells for $12 a share in cash, causing the stock to pop 71.6%. Hershey stock rose 0.1% on the news.
The deal, valued at $1.6 billion including acquired debt, is structured as a tender offer followed by a merger, and will be financed with cash on hand and new debt. The boards of both companies have approved the deal, and given that most of Hershey's voting shares are controlled by the Hershey Trust, and 57% of the outstanding shares of Amplify are controlled by its largest shareholder and insiders, there is little doubt it will go through. Amplify expects 2017 revenue to be around $377 million.
"The acquisition of Amplify and its product portfolio is an important step in our journey to becoming an innovative snacking powerhouse as together it will enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snack aisle," said Hershey CEO Michele Buck in the press release.
The acquisition makes sense for Hershey, which has been trying to expand out of the candy aisle and gain shelf space in the snack aisle. Amplify is a young company, having gone public in 2015, and it produces "Better-For-You (BFY) snacks" made with "simple, major allergen-free and non-GMO ingredients" -- certainly a new direction for Hershey. Despite the huge premium to the market price and the increase in the company's already hefty debt load, Hershey investors seem to appreciate the logic of diversifying the company's product offerings.
Campbell Soup snaps up Snyder's-Lance
Campbell Soup announced that it will be buying Snyder's-Lance -- maker of Kettle Chips, Snyder's Hanover, Pop Secret, and Emerald -- for $50 a share in an all-cash deal. The news caused Snyder's stock to rise 7%, but the offering price represents a premium of 27% to the price on Dec. 13, before media reports about the deal started appearing.
Campbell plans to finance the deal through $6.2 billion of new debt. It plans to maintain its current dividend, but curtail share buybacks in order to pay down debt. Snyders-Lance reported $2.2 billion in net sales in the trailing 12 months, and grew sales at an 11.5% compound annual growth rate from 2012 to 2016. After the acquisition, Campbell's snack business will comprise just under half of total sales.
Campbell CEO Denise Morrison said in the press release, "The acquisition of Snyder's-Lance will accelerate Campbell's strategy and is in line with our purpose, 'real food that matters for life's moments.' It will provide our consumers with an even greater variety of better-for-you snacks."
It's no coincidence that both snack food deals announced today emphasize a message of healthier food. Morrison emphasized in a recent conference call that consumer behavior is shifting, with younger consumers choosing healthier options. Campbell bought Pacific Foods of Oregon in July in an attempt to generate some growth and pivot toward a healthier message.