Mustard, ketchup maker French's sold in $4.2B deal

UPDATE 1-McCormick to buy Reckitt's food unit for $4.2 bln
Reckitt Benckiser agrees USD4.2bn price for food business with McCormick
Author

20 July, 2017

It already owns the likes of Durex condoms, Nurofen painkillers and Cillit Bang bathroom cleaner brands and in February, agreed a $17.9bn (£13.8bn) buyout of baby formula-maker Mead Johnson.

McCormick shares retreated 0.1 per cent in NY yeseterday ahead of the announcement and had gained about 4 per cent this year.

French's and Frank's RedHot will become McCormick's second- and third-largest brands, respectively, CEO Lawrence E. Kurzius said in a statement late Tuesday.

Reckitt Benckiser shares rose nearly 1.3% after it announced the sale of its food unit.

Only the food products are included in the deal.

Packaging company RPC was also among top mid-cap gainers, up 3.9 percent at a four-month high after its first quarter revenue came in ahead of past year, helped by acquisitions and favourable currency movements. This is significantly higher than the £2.2 billion expected in the City.

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McCormick has said it wants to strip out $50 million in costs, the majority of which would be achieved by 2020.

With the acquisition of Reckitt Benckiser's food division, McCormick is adding a roster of brands to its spice and seasoning mix portfolio that further strengthens the company's position as a go-to destination for adding flavor to a variety of dishes. Bloomberg reported in May that the sale was expected to draw interest from Post Holdings and Conagra Brands.

The US seasoning maker has been trying to expand its global reach and past year approached Premier Foods, the owner of British names such as Mr Kipling and Oxo stock cubes, for takeover.

McCormick, which expects the hot sauce category to continue seeing robust growth, has been trying to expand. Morgan Stanley acted as lead financial adviser to Reckitt and the company also received advice from Robey Warshaw.

The deal is subject to customary purchase price adjustments, and regulatory approval Reckitt said. 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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