Please ensure Javascript is enabled for purposes of website accessibility

Kraft Heinz Selling Planters Nuts to Hormel for $3.35 Billion

By Eric Volkman - Feb 11, 2021 at 5:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The buyer says that financing the deal won't put its hallowed dividend in jeopardy.

Mr. Peanut is on the move.

Kraft Heinz (KHC 2.05%) announced Thursday that it is selling most of the products sold under the well-established Planters nuts brand to food industry peer Hormel (HRL 0.43%) for $3.35 billion in cash. The latter company pointed out that the effective price is actually around $2.79 billion due to a tax benefit of around $560 million.

The acquisition bolsters Hormel's already-considerable portfolio of snack brands. The company owns Skippy peanut butter and the Justin's line of treats, among other assets in the segment.

A bowl of mixed nuts and a glass of beer on a table.

Image source: Getty Images.

In its own press release on the Kraft Heinz deal, Hormel said that Planters' net sales in 2020 were roughly $1 billion. It said that owning the brand will "enhance" its overall profit margins and cash flow, although it did not provide further details. 

Hormel did imply that the purchase was well within its financial means. "The acquisition of the Planters® branded business further demonstrates our disciplined financial approach to [mergers and acquisitions]," it quoted CFO Jim Sheehan as saying.

"We expect this acquisition will responsibly leverage our balance sheet and will not compromise our disciplined capital allocation policy, especially our commitment to dividend growth," he added.

A popular dividend stock, Hormel is in fact a Dividend Aristocrat -- one of the handful of S&P 500 index components that has raised its payout at least once annually for a minimum of 25 years in a row.

As for Kraft Heinz, unloading Planters "will enable us to sharpen our focus on areas with greater growth prospects and competitive advantage for our powerhouse brands," it quoted CEO Miguel Patricio as saying.

Both companies expect the transaction to close by the end of the second quarter. It is subject to approval from the relevant regulatory authorities.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hormel Foods Corporation Stock Quote
Hormel Foods Corporation
$48.63 (0.43%) $0.21
Kraft Heinz Intermediate Corporation II Stock Quote
Kraft Heinz Intermediate Corporation II
$37.83 (2.05%) $0.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.