Spice Maker McCormick Adds French's Mustard to Its Shelf -- Update
19 July 2017 - 5:38PM
Dow Jones News
By WSJ Staff
McCormick & Co. said it agreed to acquire Reckitt Benckiser
Group PLC's food division, whose brands include French's mustard,
for $4.2 billion, the latest in a wave of deal activity in the
global packaged-foods sector.
The Sparks, Md., spice maker said late Tuesday it would
integrate the U.K. consumer-goods company's RB Foods business --
whose other products include Frank's RedHot hot sauce and
Cattlemen's barbecue sauce -- into its commercial and industrial
segments.
The deal, which was confirmed by Reckitt in a statement, comes
three months after the U.K. company put its food unit up for sale,
and amid a flurry of M&A activity in an industry looking to cut
costs amid slowing sales.
Many companies are trying to pivot to cope with a fiercely
competitive market. Low inflation has made it difficult to raise
prices to make up for sluggish sales growth.
In February, Reckitt agreed to acquire baby-food maker Mead
Johnson Nutrition Co. for $16.6 billion.
Unilever PLC, the British consumer-goods behemoth that earlier
this year rejected Kraft Heinz Co.'s $143 billion takeover bid, has
said it is planning to unload its margarine-and-spreads
business.
And Switzerland's Nestlé SA last month put its U.S.
confectionery business up for sale. In May, Conagra Brands Inc.,
owner of Slim Jim jerky and Chef Boyardee canned pasta, agreed to
sell its Wesson cooking-oil brand to J.M. Smucker Co.
RB Foods generated GBP411 million ($536 million) of Reckitt's
overall revenue of GBP9.89 billion in 2016.
McCormick, whose brands include Lawry's and Grill Mates, said it
expects combined 2017 annual net sales of about $5 billion. It also
projects the deal will generate cost savings of around $50 million,
the majority of which will be achieved by 2020.
McCormick on Tuesday said it expects the acquisition, which
requires regulatory approval, to be completed in the fiscal third
or fourth quarter of 2017. Credit Suisse and Cleary Gottlieb Steen
& Hamilton LLP are serving as financial adviser and legal
counsel, respectively, to McCormick, the company said.
The company said it had obtained bridge financing and expects to
finance the transaction through a combination of debt and
equity.
Though McCormick's leverage ratio will increase because of the
deal, the company plans to maintain its dividend policy but curtail
its share-buyback program in an effort to maintain its
investment-grade credit rating, it said.
Reckitt said it intends to use the proceeds from the deal to
reduce its debt.
"Following the acquisition of Mead Johnson Nutrition, this
transaction marks another step towards transforming RB into a
global leader in consumer health and hygiene," said Reckitt Chief
Executive Rakesh Kapoor.
McCormick last year made a failed attempt to acquire British
food manufacturer Premier Foods PLC for GBP537 million.
(END) Dow Jones Newswires
July 19, 2017 03:23 ET (07:23 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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