Hormel Foods Corp.

Wednesday, February 21, 2001

Hormel Foods Corp. has reached a definitive agreement to acquire the assets of Diamond Crystal Brands nutritional products.

Diamond Crystal Brands nutritional products (DCBNP) is a business of Diamond Crystal Brands Inc., a wholly owned subsidiary of Imperial Sugar Co. that voluntarily filed petitions Jan. 16 in the U.S. District Court in Wilmington, Del., under Chapter 11 of the U.S. Bankruptcy Code. The transaction is valued at about $65 million in cash, subject to certain post-closing adjustments and requires the approval of the bankruptcy court.

Hormel Foods will combine the assets of DCBNP with its Hormel HealthLabs subsidiary. Along with the acquisition of Cliffdale Farms, which closed Dec. 1, the latest acquisition will strengthen the position of Hormel HealthLabs in the nutritional products market, making the company one of the industry’s leaders with sales in excess of $100 million.

Certain regulatory approvals already have been received, including necessary clearances under the Hart-Scott-Rodino Act, and the transaction is expected to close sometime during the second calendar quarter of 2001. Salomon Smith Barney of New York acted as financial adviser to Hormel Foods. Dorsey & Whitney LLP of Minneapolis acted as external legal counsel to Hormel Foods.

DCBNP, headquartered in Savannah, Ga., sells a variety of nutritionally enhanced products to food service customers, primarily hospitals and nursing homes. The company had sales of about $63 million in its most recent fiscal year. DCBNP’s product line has more than 170 items, including thickened ready-to-serve juices, frozen pureed meats and entrees, fortified shakes and breakfast mixes, ready-to-serve instant breakfasts, low sodium sauces and gravies, salad dressings and other condiments.

"With the addition of the DCBNP product line, customer base and distributor relationships, Hormel HealthLabs substantially strengthens its position in the marketplace for nutritionally enhanced food products," said Joel W. Johnson, chairman of the board, president and chief executive officer of Hormel Foods. "DCBNP enjoys a reputation for flavorful, quality products and brings us a valuable portfolio of proprietary formulations for nutritionally enhanced foods.

"There is a rapidly expanding demographic opportunity involving the growing senior population. With this acquisition, we plan to expand upon our experience and leadership role in the institutional health care market."

DCBNP currently offers a broad line of thickeners and thickened and pureed products. These products are primarily for patients who need texture-modified foods, such as those with dysphagia (swallowing difficulties). In this category, DCBNP provides tasty and nourishing juice, meat and entree products.

DCBNP’s dry and ready-to-serve products include fortified shake and breakfast mixes, instant breakfasts, puddings, low-sodium sauces, soups and gravies required by dietitians to meet the special dietary needs of patients. These products provide a high level of nutrients to patients at risk of malnutrition in good-tasting, visually appealing, economical and easy-to-use formulations.

DCBNP also offers a line of frozen supplements that includes fortified shakes, dessert cups and cookies and frozen prepared entrees. These frozen fortified products are widely used in hospitals and nursing homes nationwide.

Hormel HealthLabs, a subsidiary of Hormel Foods, markets flavorful foods for people with special dietary needs, such as dysphagia, bowel problems, malnutrition and diabetes. Products are marketed to hospitals, nursing homes and other health facilities. Originally known as American Institutional Products (AIP), the business was acquired in 1994 and the headquarters subsequently relocated to Austin.