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Hormel Foods buying Skippy for $700M

Lunch meat purveyor Hormel Foods is making a run at the supermarket's middle aisles, buying the Skippy peanut butter brand for about $700 million.

The Austin, Minn., company, also known for its Spam canned ham, is acquiring Skippy from Unilever's U.S. operation, which also owns brands such as Vaseline and I Can't Believe It's Not Butter!

Hormel, whose main strength is its domestic sales of Jennie-O, Farmer John and other lunch meats, is trying to expand its portfolio of products and boost sales overseas.

Skippy, Hormel chief executive Jeffrey M. Ettinger said in a conference call with analysts, "will become one of our biggest brands."

Introduced in 1932, Skippy is the second-largest U.S. peanut butter brand, trailing only Jif, which is owned by the J.M. Smucker Co. Peanut butter racks up $2 billion in annual U.S. retail sales, according to Hormel. Nearly three quarters of U.S. households eat peanut butter, Hormel says.

Skippy sells 11 varieties of peanut butter. It's the top brand in China and is sold in more than 30 other countries.

Hormel said it expects Skippy to bring in annual sales of $370 million, nearly $100 million of that from abroad.

Ettinger emphasized Skippy's leading role in the market for natural peanut butter, which he said makes up a quarter of domestic peanut butter sales. He also noted Hormel's efforts to break into side dishes and Mexican food.

The deal gives Hormel control of Skippy manufacturing facilities in Little Rock, Ark., and Weifang, China. After regulatory approval, the transaction is expected to close early this year.

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