Hormel buying Muscle Milk maker for $450M


Hormel (HRL) is buying CytoSport Holdings, maker of Muscle Milk protein drinks and other high-protein products, for $450M.

With CytoSport expected to have 2014 sales of $370M, Hormel is paying ~1.2x forward sales. The deal is expected to be neutral to FY14 (ends Oct. '14) EPS, and be accretive to FY15 EPS by $0.05.

Hormel: "Muscle Milk products will serve as a growth catalyst for our Specialty Foods segment, providing this division with a leading brand in the high-growth sports nutrition category ... The acquisition of CytoSport expands our offerings of portable, immediate, protein-rich foods, and broadens our appeal with younger consumers."

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Comments (20)
  • Toby Shute
    , contributor
    Comments (156) | Send Message
     
    Stiritz didn't want this one for POST?
    30 Jun 2014, 06:57 PM Reply Like
  • 50 cent it is
    , contributor
    Comments (1453) | Send Message
     
    toby
    no he is waiting for herbalife
    30 Jun 2014, 08:40 PM Reply Like
  • quabbin
    , contributor
    Comments (127) | Send Message
     
    Spam and muscle milk for breakfast!
    When will Monsanto buy Hormel?
    30 Jun 2014, 07:40 PM Reply Like
  • machiavelli
    , contributor
    Comments (723) | Send Message
     
    ...with 50% less intestinal blockage with new GMO fiber-infused milk and pork! :p
    30 Jun 2014, 08:27 PM Reply Like
  • 50 cent it is
    , contributor
    Comments (1453) | Send Message
     
    protein powder Who else makes that.oh yes herbalife!
    30 Jun 2014, 08:41 PM Reply Like
  • King Rat
    , contributor
    Comments (1357) | Send Message
     
    This is an interesting match. Hormel seems to sell reasonably priced, minimally processed protein. Muscle Milk sells overpriced, maximally processed protein.

     

    The Hormel name evokes economy and the Muscle Milk name evokes gym d-baggery.
    30 Jun 2014, 08:43 PM Reply Like
  • Equitable Research
    , contributor
    Comments (2185) | Send Message
     
    Not good news for MSLP. Pretty low valuation on P/S basis and the industry about to get alot more competitive.
    30 Jun 2014, 09:25 PM Reply Like
  • dindin21
    , contributor
    Comments (118) | Send Message
     
    What do you mean not good for MSLP?!
    1.) That would be a 40% premium to THIS years sales original sales forecast of 150 millon.
    2.) It demonstrates supplement companies are being bought out.
    3.) MSLP will command more than a 20% sales premium
    30 Jun 2014, 10:42 PM Reply Like
  • Equitable Research
    , contributor
    Comments (2185) | Send Message
     
    I think that the bull acquisition thesis is based on alot more than 1.2 x sales. I've read 3-5 times sales. I'd need more numbers on Cyto like YOY sales growth and gross margin to really make a fair comparison. So my observation is cursory.
    30 Jun 2014, 11:20 PM Reply Like
  • D Reed
    , contributor
    Comments (60) | Send Message
     
    Not sure about 5x sales, but MSLP should certainly grab more of a premium than 1.2x sales. Cyto is an inferior company in terms of product quality, product popularity, branding/marketing, sales growth and established business relationships. Even still, a lowball premium of only 1.2x sales for MSLP would mean about $18/share today.
    1 Jul 2014, 01:21 AM Reply Like
  • Equitable Research
    , contributor
    Comments (2185) | Send Message
     
    MSLP still has questionable management and lingering SEC investigation.
    1 Jul 2014, 09:49 AM Reply Like
  • D Reed
    , contributor
    Comments (60) | Send Message
     
    Investigation is a nearly resolved non-issue, up-listing is imminent, and say what you want about management (Pyatt was a football player, not a business man), but the right people have been brought in to guide this ship. That is the reason why they have a stranglehold on the business now and the significant marketing/distribution advantages they do. Many have said it before and I will say it again, Dr. Frost being around helps this company significantly. He is heavily invested through cash, BZNE, etc..., he has a very impressive track record and is really just icing on a cake that was already worth buying.
    1 Jul 2014, 11:06 AM Reply Like
  • Equitable Research
    , contributor
    Comments (2185) | Send Message
     
    The reason I didn't buy MSLP at $6 (and I looked at it extensively) is mainly management issues. Nothing to do with the CEO being a football player but the dilution I felt was not accretive to being a shareholder. I certainly feel it is risky at $12, especially with this Cyto buy coming in well below P/S expectations (my expectations anyhow).
    1 Jul 2014, 11:49 AM Reply Like
  • Equitable Research
    , contributor
    Comments (2185) | Send Message
     
    I agree that Frost's involvement is the major bull case for MSLP and thats what turned me on to it. But he bought at $6. Is it still good value at $12?
    1 Jul 2014, 11:54 AM Reply Like
  • D Reed
    , contributor
    Comments (60) | Send Message
     
    I bought more at $11.75 and based on the pros discussed in the article and comments feel very comfortable doing so.
    1 Jul 2014, 06:17 PM Reply Like
  • ComputerBlue
    , contributor
    Comments (1150) | Send Message
     
    Muscle milk and cytosport's other products have way too many ingredients and have contained elevated levels of heavy metals in the past. The fitness industry is evolving to more paleo based products. IE, minimal ingredients.
    30 Jun 2014, 09:34 PM Reply Like
  • jstratt
    , contributor
    Comments (3567) | Send Message
     
    Smart move for Hormel!

     

    They have a great currency in their stock trading at a 24 PE and seem to have paid a fair price for the Muscle Milk company.
    1 Jul 2014, 12:14 PM Reply Like
  • Equitable Research
    , contributor
    Comments (2185) | Send Message
     
    Agreed. Looks like a good acquisition.
    1 Jul 2014, 12:16 PM Reply Like
  • 50 cent it is
    , contributor
    Comments (1453) | Send Message
     
    This is the worst possible news for Ackman who shorted Herbalife.
    Industry cereal volumes are declining 3-5 percent annually ,Post and private label being the exception . This comes after years of cereal growing 3 percent annually.
    The game is on for protein and powder manufacturers can efficiently,nutritionally and cost effectively deliver it to the consumer.
    Herbalife is bright on the radar screen of M and A and will be snapped up by a food company
    2 Jul 2014, 09:29 AM Reply Like
  • 50 cent it is
    , contributor
    Comments (1453) | Send Message
     
    This does not bode well for Ackman who is short herbalife that also makes a protein powder product but on a much larger scale.
    M and A activity in food and especially protein powder is active and the radar screens are brightly lit.
    2 Jul 2014, 09:32 AM Reply Like
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