French's Mustard on the Block Amid Reckitt Review -- 2nd Update
03 April 2017 - 9:45PM
Dow Jones News
By Denise Roland
French's mustard is up for sale.
Reckitt Benckiser Group PLC, the British owner of America's
best-selling mustard, as well as Durex condoms and Lysol, said it
had started a strategic review of its food business. The company is
considering all options for the unit as it seeks to close its $16.6
billion takeover of baby-food maker Mead Johnson Nutrition Co.
The French's unit, which also includes Frank's RedHot pepper
sauces and Cattlemen's barbecue sauces, generated GBP411 million
($513.4 million) of the company's overall revenue of GBP9.89
billion in 2016. Reckitt didn't provide further detail except to
say the unit was no longer considered core.
Bankers and analysts estimated that the food unit could be worth
$2.5 billion to $4 billion.
The move comes as Unilever PLC is the middle of its own
strategic review of its portfolio, after snubbing a $143 billion
bid by Kraft Heinz Co.
Both reviews come as consumer-goods giants re-evaluate their
slower-growing packaged-food businesses and increasingly move
toward higher-margin health and household goods. Investors for
years have been encouraging Unilever to sell underperforming
businesses such as its spreads unit, which includes margarines like
Flora and Blue Band.
Reckitt's acquisition of Mead Johnson stands to nearly double
the size of its consumer-health business and will push the Slough,
England, company deeper into emerging markets. Reckitt Chief
Executive Rakesh Kapoor lost out to Bayer AG in a bidding war for
Merck & Co.'s consumer business in 2014 and since had been
seeking a major acquisition.
Reckitt already has financing lined up for the Mead Johnson
purchase and doesn't see it as a primary motivation for selling
French's, a person familiar with the situation said.
"Its main value would be as a sale to another food company," the
person said, noting that its value to a private-equity buyer would
be limited due to Reckitt's lean management of the business.
French's is already managed separately from the rest of Reckitt
Benckiser's business, which largely focuses on cleaning products,
over-the-counter remedies and brands such as K-Y lubricants and
Veet hair-removal cream.
This is a busy time for shopping around a food business:
France's Danone SA last week put its Stonyfield organic yogurt unit
up for sale, seeking to clear the biggest antitrust hurdle to its
$10.4 billion acquisition of WhiteWave Foods Co.
On Friday, Reckitt disclosed in its annual report that the board
cut Mr. Kapoor's pay last year after a scandal at the company's
South Korean business, in which scores of people were killed and
hundreds left with permanent lung damage by a humidifier
disinfectant between 2001 and 2011.
Mr. Kapoor received total pay of GBP14.6 million last year,
compared with GBP25.5 million in 2015, a figure that made him one
of the highest-paid bosses in the FTSE 100 that year. His 2015 pay
package stoked a rebellion among some shareholders, with 18% of
investors voting against last year's pay policy.
Reckitt's remuneration committee said Mr. Kapoor would have been
entitled to a further GBP14 million in bonus and share rewards had
the committee not decided to "exercise discretion" to curb his
pay.
Ben Dummett and Ian Walker contributed to this article.
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
April 03, 2017 07:30 ET (11:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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