Hormel Foods (NYSE: HRL), which was established in 1891 as Geo. A. Hormel & Co. is one of the leading meat processing companies of the world. The company provides a whole array of products ranging from grocery products to specialty foods, and refrigerated foods to Jennie-O Turkey Store. The company has, recently, embarked upon the task of further diversifying its product list.

The company decided to take CytoSport, the maker of Muscle Milk® products, under its wings. On Monday, Hormel Foods (NYSE: HRL) made a binding contract with CytoSport: however, the agreement is subject to certain closing conditions, which also includes the receipt of United State’s regulatory approval. Word has it that the deal will be finalized in a matter of 30 days.

CytoSport, which is based in California, was founded by Pickett family, in 1998. The company is widely known for its top class ready-to-drink beverages. When talking about the number 1 protein beverage brands, Muscle Milk comes to mind instantly. These high energy sports nutrition drinks, where on the one hand, fulfills the requirement of protein products category of Hormel Foods (NYSE: HRL). They, on the other hand, also diversify the company’s portfolio.

Sources have it that one of the reasons for this acquisition was that the protein-related products have become very popular recently, and the market size has increased considerably. According to Nielsen, an analyst research firm, the market size of protein products in United States reached $7.5 billion by the mid February of the current year. If compared with the same time period four years ago, a considerable increase of 50 percent can be seen.

According to Hormel Foods (NYSE: HRL), a total annual sale of $370 million is predicted for the year 2014. Since, the purchase price of CytoSport is almost $450 million, estimates suggests that there will be a neutral impact on the 2014 fiscal earnings because of all the transaction and processing costs. The company, however, is confident that by the end of 2015, it will gain approximately 5 cents on each share.

According to the chief executive officer, president and chairman of the board, Jeffrey M. Ettinger, Hormel Foods carried on with the transaction only after it had assessed the benefits that this deal would confer on the company. He further stated that the high energy sports nutrition products of CytoSport will serve as a catalyst for the growth of Hormel Foods (NYSE: HRL)’s Specialty Foods category. He went on and claimed that this transaction will expand the company’s portfolio of portable, high protein products and will broaden the target audience of the company’s products by reaching out to the youngsters of the country. According to Jeffery M. Ettinger, this deal has further enhanced Hormel Foods (NYSE: HRL)’s goal of achieving a balanced business structure.

Hormel Foods (NYSE: HRL) also acquired Unilever’s Skippy Peanut Butter brand last year, for almost $700 million. Hence, chances are that its acquisition spree is not going to stop and the deal will be finalized eventually.

Get Free Updates and Stock Alerts!

*We only send one email per week