Hormel Foods Corp. acquires Turkey Store Co.
Published 12:00 am Tuesday, January 23, 2001
Tuesday, January 23, 2001
Hormel Foods Corp. announced today that it has reached an agreement to buy Wisconsin-based The Turkey Store Co. in an acquisition that will be Hormel’s largest ever.
The agreement calls for Hormel to buy the Barron, Wis., business for $334.4 million in cash, subject to adjustment for outstanding indebtedness and changes in working capital at closing.
Hormel, based in Austin, is one of the nation’s largest manufacturers and marketers of consumer-branded meat and food products.
"We welcome The Turkey Store Co. to the Hormel Foods family," Joel W. Johnson, chairman of the board, president and chief executive officer of Hormel Foods, said in a prepared news release. "The Turkey Store is an extremely well-run company with strong brands and an excellent record of efficient production. We can learn a lot from The Turkey Store and it from Jennie-O Foods, our turkey business. We can strengthen both companies by bringing them together. This combination offers significant synergies, and we expect it to be immediately accretive."
The Turkey Store Co. is a leading producer, processor and marketer of fresh and cooked turkey products, marketed principally under The Turkey Store brand and available nationwide in grocers’ fresh meat cases, delis and food service operations.
With processed tonnage of 375 million pounds and annual sales of about $309 million for the fiscal year ended in February 2000, The Turkey Store Co. is the sixth largest turkey operation in the United States.
Hormel Foods will merge The Turkey Store Co., a family- and employee-owned company, into its wholly owned subsidiary, Jennie-O Foods, headquartered in Willmar, Minn. Jennie-O Foods is the world’s largest turkey processor, having processed more than 865 million pounds last year.
With the acquisition of The Turkey Store Co., Hormel Foods will process more than 1.2 billion pounds of turkey annually and strengthen its position as an industry-leading provider of branded, value-added turkey products.
Hormel Foods, including Jennie-O Foods and The Turkey Store Company, will employ more than 14,700 people, including 7,800 in Minnesota and 2,200 in Wisconsin.
Johnson said the transaction brings together the two best turkey companies in the United States.
"The Turkey Store Co. is a top-performing business in every respect," Johnson said. "The Turkey Store brand’s No. 1 position in fresh boneless retail products complements our Jennie-O brand’s strong presence in the further-processed retail, food service and deli areas. The combination creates the industry’s most extensive line of branded turkey products and enables us to be an even more complete supplier to our customers, resulting in improved logistics and customer service. We were also attracted to The Turkey Store Co. because it, like our Jennie-O Foods subsidiary, is based in the Upper Midwest, where turkeys grow very well on the best and least cost grains available in this country. We anticipate accelerated revenue growth and significant cost synergies as a result of this transaction and the subsequent integration of the Jennie-O Foods and The Turkey Store Co. operations."
Benefits from the acquisition are expected to include:
– Formation of the industry’s most complete supplier of high-quality, branded turkey products, enjoying the broadest distribution across the retail, food service and deli channels.
– Opportunity to extend the Jennie-O and The Turkey Store brands into new distribution channels.
– Cost synergies in live production through improved egg, poultry and tom production.
– Increased manufacturing scale and improved capacity utilization.
– Complementary use of raw materials resulting in less commodity product and byproduct per pound of processed turkey – the Jennie-O Foods portfolio uses more breast meat and The Turkey Store Co. more dark meat.
– Exchange of patented and proprietary equipment and systems improving manufacturing efficiency.
– Improved administrative efficiency.
– Accelerated new product introductions through combined research and development programs.
– Geographically proximate operations facilitating the efficient combination of management and production.
Jerry K. Jerome, chairman and chief executive officer of The Turkey Store Co., said combining his business with Hormel Foods and its Jennie-O Foods subsidiary creates new opportunities to grow The Turkey Store brand.
"Hormel Foods and Jennie-O Foods enjoy an outstanding reputation and strong relationships with retail, deli and food service customers that represent valuable additional distribution channels for our products," Jerome said. "Combining our companies promises to strengthen both franchises. My management team and I have longstanding respect for Hormel Foods and Jennie-O Foods, and we look forward to joining them."
After closing, Jerome will become chairman and chief executive officer of the Jennie-O Foods Turkey Store subsidiary of Hormel Foods.
"His more than 25 years experience in the turkey industry will be an important element in ensuring the successful integration of The Turkey Store Co. into the Hormel Foods family and the continued growth and success of the combined turkey business," Johnson said.
In consideration of Jerome’s ongoing role, he and Hormel Foods will enter into a five-year employment agreement and an incentive compensation plan, under which certain incentive compensation will be paid annually, contingent upon his continued employment and the achievement of certain operating income thresholds, which would accompany extraordinary performance of the combined Jennie-O Foods Turkey Store business.
Jeffrey M. Ettinger, current president of Jennie-O Foods, will serve as president and chief operating officer of the combined business. Earl B. Olson, founder of Jennie-O Foods and current chairman, will become chairman emeritus of Jennie-O Foods Turkey Store. The headquarters of the combined turkey business will be in Willmar, Minn.
Certain regulatory approvals have already been received, including necessary clearances under the Hart-Scott-Rodino Act, and the transaction is expected to close by March 1. Goldman, Sachs & Co., New York, N.Y., acted as financial adviser to Hormel Foods with Houlihan Lokey Howard & Zukin, Chicago, Ill., handling this function for The Turkey Store Co. Dorsey & Whitney LLP, Minneapolis, Minn., acted as external legal counsel to Hormel Foods. Michael Best & Freidrich LLP, Madison, Wis., provided external legal counsel to The Turkey Store Co.
About The Turkey Store Co.
The Turkey Store Co. is one of the nation’s largest fully integrated turkey operations, managing all stages of turkey production from breeding, hatching, feeding and growing to processing and marketing of turkey products.
The company operates a processing facility, a feed mill, a hatchery and growing farms in Barron; another processing facility in Faribault, Minn.; feed mills in Medford and Northfield, Minn., and growing farms throughout northwest Wisconsin and southern Minnesota.
The Turkey Store Co. employs more than 2,500 people, including 1,800 in Barron.
The Turkey Store Co. produces and markets products in three categories:
– Retail fresh: The Turkey Store Co. offers the most extensive variety of fresh turkey sold in grocers’ fresh meat cases. The Turkey Store brand is the leading brand of fresh boneless turkey in the U.S. Products include ground turkey, breast slices, breast tenderloins, breast roasts, dinner sausages, ground breast meat and seasoned cuts.
– Deli: The Turkey Store Co. offers leading deli products under The Turkey Store and Norwestern brands which consist primarily of cooked turkey used for slicing in deli operations.
– Food service: The Turkey Store Co.’s food service offerings include a combination of products sold in the retail and deli segments.