Bam! Martha Stewart acquires Emeril

Someone’s in the kitchen with Martha: celebrity chef Emeril Lagasse.

After searching for an acquisition for years, Martha Stewart Living Omnimedia (MSO) on Monday said it bought the rights to Lagasse’s television programming, cookbooks, website, licensed kitchen products and food such as the Bam! B-Q sauce, spices and marinades. The agreement excludes Lagasse’s 11 restaurants and corporate offices.

The deal, for $45 million in cash plus $5 million in stock, marks the first time Stewart has deigned to share the spotlight with another celebrity inside her company and is a solid step toward diversifying away from her omnipotent presence. As Fortune reported last month, MSO has been looking to bring another tastemaker into the fold. The company has held talks in recent months with the designer Cynthia Rowley and Jonathan Adler, known for his home décor, but both deals unraveled.

Investors applauded the move pushing shares up $1.06, or 17.29 percent, to $7.19.

But before getting too carried away, it’s worth noting that the Emeril Lagasse business, like so many of MSO’s other new ventures, is still tiny. The company generated just $14 million in 2007 revenue.

Meanwhile, it’s unclear how some of MSO’s other initiatives are performing, notably the launch of a home line at Macy’s. Morgan Joseph analyst David Kestenbaum noted in a report to clients published Tuesday that MSO has so far failed to provide any clear-cut evidence of the launch’s success at a time when Macy’s is struggling with sub-par sales and store closures.

MSO has an even bigger problem looming this year in the form of Kmart royalties, which are expected to drop to $20 million from $65 million.

“Given the uncertainty of ramping up nascent initiatives in a difficult operating environment, we are downgrading to hold until we can see more clarity on Martha Stewart in 2008,” Kestenbaum wrote.