Hormel Buys Maker of Farmer John Meats, Dodger Dogs

Spam Dogs?

Hormel Foods Corp., which makes the iconic canned luncheon meat, said Thursday that it had purchased Vernon-based Clougherty Packing Co., producers of Dodger Dogs and Farmer John brand meats, for $186 million in cash.

The marriage of pork-product purveyors is expected to help Austin, Minn.-based Hormel meet production needs and strengthen the company's presence in California and the Southwest, particularly among the region's growing Latino population, Hormel executives said in a statement.

The Clougherty Packing management team and its roughly 1,800 employees -- including 300 workers on hog farms in Central California, Arizona and Wyoming -- are expected to stay in place.

"We're happy as heck," said Joe Clougherty, president of his family's namesake company. "We think it can only strengthen the brand and mean longevity for this company down the road."

Privately held Clougherty Packing doesn't disclose financial results, but Hormel executives said Clougherty's revenue was expected to be about $420 million in 2004. Hormel, which also owns the Dinty Moore and Jennie-O brands, reported sales of $4.8 billion in fiscal 2004.

Shares of Hormel closed up 52 cents to $30.65 on the New York Stock Exchange.

Analyst David C. Nelson at Credit Suisse First Boston said in a research note that the deal was positive for Hormel because "Southern California has a large and growing Hispanic population that over-indexes in pork consumption."

Nelson described Farmer John as the dominant slaughter operation on the West Coast, processing more than 1.6 million hogs a year. The Farmer John meatpacking plant in Vernon, south of downtown Los Angeles, is an area landmark, decorated with a huge mural of happy pigs enjoying life on the farm.

A banker involved in the deal portrayed the plant as one of the attractions for Hormel.

"In meatpacking today, you don't have the opportunity to locate a modern, highly efficient facility smack dab in the middle of such a large metropolitan area," said Lars Ekstrom, managing director of Goldsmith Agio Helms, the Century City-based investment banking firm that advised Clougherty Packing. "The location is obviously very desirable for Hormel."

Clougherty Packing traces its roots to the 1930s, when brothers Barney and Francis Clougherty started curing pork bellies and smoking hams in Los Angeles, leasing space in the Woodward-Bennett Packing plant.