Hershey Acquiring Amplify For $1.6 Billion

The Hershey Co., which makes Kisses, announced on Monday its plans to buy Amplify Snack Brands, the maker of SkinnyPop for the price of $1.6 billion.

This acquisition comes as Hershey increases its efforts to move beyond just chocolate. It is another of a series of snacks acquisition, as companies in the industry look to reach more diners on the go.

This deal by Hershey places a value on Amplify stock at $12 per share, which is a premium of 71% on Friday’s closing price.

The deal is one of new CEO Michele Buck’s first big initiatives. Buck took the reins of the company earlier in 2017, shortly after Hershey refused a bid by Mondelez International the maker of Oreo Cookies to take it over.

Buck has talked openly about her plans to expand more into the snack category that is estimated to be $33 billion in size. CFO at Hershey Patricia Little acknowledged recently during an investor call that nothing is more profitable than Hershey’s core products, but the portfolio must be expanded.

The sweets manufacturer, which has been focusing on “snackfection” its blurring of the lines between sweet and salty snacks, just recently launched Reese’s and Hershey’s chocolate dipped pretzels and popped snack mix.

It has been rare for snacks to be a growth area for most food companies, as consumers in the U.S. are increasingly shifting to on-the-go food. Amongst snacks, salty bites like chips and popcorn are the leaders beating out cheese, cookies and candy.

Hershey like many peers has for years looked to enter the snack category through several small acquisitions. It purchased Krave Pure Foods the maker of beef jerky in 2015 and one year later the parent company of barkThins the healthy chocolate bar.

However, it remains difficult to grow the smaller brands to the scale where they will make an impact within a company that in 2016 generated sales of over $7.4 billion.

Of recent, the large food companies are making larger bets, confronted with slow sales and more of a competitive environment. With a scarcity of large snack brands that can make a big impact, those that have strength have been sold at hefty premiums.

In the past few months, Kellogg said it was buying RXBar for $600 million, and Mars acquired Kind Bar’s parent company for over $3 billion. Campbell Soup is holding advanced talks with Snyder’s-Lance to acquire the second largest salty snack maker in the U.S.

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