Spice maker McCormick buys Reckitt Benckiser's food brands

Jul 20, 2017, 00:52
Spice maker McCormick buys Reckitt Benckiser's food brands

The British consumer goods behemoth said it would look to offload its food business back in April after picking up infant formula maker Mead Johnson for $17.9bn.

McCormick shares retreated 0.1 per cent in NY yeseterday ahead of the announcement and had gained about 4 per cent this year. The purchase of these brands "enables McCormick to become a one-stop shop for condiment, spice and seasoning needs, providing our customers and consumers with an even more diverse and complete flavor product offering".

Only the food products are included in the deal.

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The deal will hand McCormick a leading position in the condiments sector in the United States.

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Rakesh Kapoor, chief executive of RB, said: "Our French's Food business is a true reflection of RB's strengths - a portfolio of great brands driven through a culture of innovation by passionate people to deliver consistent outperformance". Other possible bidders included JM Smucker, Campbell Soup, Pinnacle Foods and Ajinomoto, people familiar with the situation said at the time.

The hot sauce category will continue to see robust growth, according to McCormick, and there are significant opportunities for expansion. The company went after another United Kingdom business in 2016, when it considered buying Premier Foods.

The market reaction suggests that investors think McCormick may have paid too-high a price. McCormick's Kurzius said at the time that Premier was just one of the company's M&A ideas. Morgan Stanley acted as lead financial adviser to Reckitt and the company also received advice from Robey Warshaw.

The transaction still requires regulatory approval, and is expected to close later this year. McCormick plans to fund the deal with a combination of equity and debt, and said it has obtained committed bridge financing.

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