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Spam maker Hormel bulks up by buying Muscle Milk maker CytoSport for $450M

NEW YORK, N.Y. - The maker of Spam is bulking up on its protein with Muscle Milk.

Hormel Foods is paying $450 million to acquire CytoSport, which owns Muscle Milk sports nutrition drinks, bars and powders. The move builds on Hormel's push to expand beyond its stable of packaged meats, which include Dinty Moore stews and its namesake chili, with different kinds of protein. Last year, the company also added Skippy peanut butter to its lineup.

Hormel CEO Jeff Ettinger said people are increasingly looking for portable, easy-to-eat products packed with protein. It's why the company recently introduced Rev snack wraps that contain meat and cheese, and Skippy Singles, which are portion-controlled packs of the peanut butter.

As for Muscle Milk, Ettinger said in a phone interview that the brand's customers tend to be younger and have expanded beyond serious athletes over the years. He noted that the drink is advertised on college campuses, for instance, and that students often drink it as a replacement for breakfast or a mid-afternoon snack.

"There are so many meals and quasi-meals that are consumed on the go now," he said.

Americans have been looking to boost their protein intake in recent years, and packaged food makers have been responding by adding it to a wide array of products. General Mills Inc. even recently rolled out a version of Cheerios with extra protein and offers versions of its Nature Valley granola bars with protein.

The demand for protein is showing up in the drinks as well. PepsiCo's Gatorade has a "post-game recovery" drink with 16 grams of protein. And last year, Coca-Cola Co. bought a stake in the maker of Core Power, which is marketed as a post-workout recovery drink.

Muscle Milk, which does not contain any milk, is shelf-stable but is usually sold chilled in convenience stores, where it generates 30 per cent of its total sales.

Hormel's canned meats, meanwhile, haven't exactly been a booming growth area despite their protein content. In the latest quarter, the company said sales of its grocery products were flat, with Spam suffering a decline. Its refrigerated foods such as Black Label bacon fared better, reflecting the trend toward foods people feel are fresher.

The company, based in Austin, Minnesota, said private-equity firm TSG Consumer Partners will sell its stake in CytoSport, which is based in Benicia, California.

CytoSport founders Greg and Mike Pickett, who are father and son, will still be involved in day-to-day operations. For 2014, Hormel said it expects sales of CytoSport to be about $370 million. The deal will add about 5 cents per share to its fiscal 2015 earnings, the company said.

Shares of Hormel Foods Corp. slipped 14 cents to $49.21.

The deal is expected to close within 30 days.

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Follow Candice Choi at www.twitter.com/candicechoi

The Canadian Press


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