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Bloomberg: Unilever's $2B Ragu attracting host of suitors

  • Unilever's (UL) Ragu brand is attracting interest from Hormel Foods (HRL) and J.M. Smucker (SJM), Bloomberg reports, with Pinnacle Foods (PF), Hillshire Brands (HSH), Post Holdings (POST) and Japanese grocery supplier Mizkan also eying the pasta sauce.
  • First round bids for Ragu, which could bring in up to $2B, are due in at the end of this week.
  • The auction adds to Unilever's sale of other famous food brands such as Skippy peanut butter last year. Ragu makes up 40% of the company's pasta-sauce sales of $1.2B and is the U.S. market leader, but revenue has fallen 18% since 2009.
Comments (9)
  • chuikov
    , contributor
    Comments (2) | Send Message
     
    "pasta source" eh? - the ultimate origin of all known pasta! No wander (sorry - "wonder") potential buyers are interested.
    23 Mar, 10:36 AM Reply Like
  • Ben Hanson
    , contributor
    Comments (403) | Send Message
     
    When I read that the first time, I almost believed it was an industry term, as in "revenue generated by pasta products." Silly me.
    23 Mar, 08:56 PM Reply Like
  • SA Editor Yigal Grayeff
    , contributor
    Comments (343) | Send Message
     
    Apologies for the error, which has been corrected.

     

    If nothing else, it should have provided a bit of mirth.

     

    Yigal
    24 Mar, 05:39 AM Reply Like
  • Dividend Growth Machine
    , contributor
    Comments (1445) | Send Message
     
    Hormel paid about 1.9x sales for Skippy last year. If Ragu brings in about $480M in sales (based on the information above), then a similar multiple would imply a purchase price of around $912M. Considering that Ragu sales have been declining, it doesn't seem to warrant a higher multiple than Skippy. What is the source for the $2B estimate given in the article?

     

    That aside, at the right price I think Ragu could be a good acquisition for Hormel, which has been nicely expanding its Mexican food category.
    23 Mar, 11:29 AM Reply Like
  • Long Term Value
    , contributor
    Comments (170) | Send Message
     
    Good observation!
    23 Mar, 10:11 PM Reply Like
  • Mauiwalt
    , contributor
    Comments (20) | Send Message
     
    Ragu sales are heavily coupon driven. The product needs to be reformulated to taste better and then there would be no need for coupon losses.
    It is an Italian sauce, it is not in the Mexican category, but it is a confused brand and people, after doctoring it to taste, use it in both styles. This is part of their problem, who wants to buy an Italian sauce and then have to go to work to make it sing?
    23 Mar, 08:22 PM Reply Like
  • Charles Moscoe
    , contributor
    Comments (1333) | Send Message
     
    Agree. Terrible product and declining sales. How could Ragu possibly sell for over $1B, let alone for over $2B? Makes no sense...
    23 Mar, 08:46 PM Reply Like
  • Ben Hanson
    , contributor
    Comments (403) | Send Message
     
    Hope of a turnaround? People know the name, and a new improved version could catch on.
    24 Mar, 01:05 AM Reply Like
  • rjj1960
    , contributor
    Comments (1359) | Send Message
     
    I think they should be paying 2 Billion to take it off their hands, awful product.
    24 Mar, 07:55 AM Reply Like
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