Update – Unilever, McCormick strike “merger”

Unilever and McCormick have finalised a deal to combine much of the UK consumer-goods giant’s food assets with the US spices and seasonings group.
The transaction values the Knorr owner’s food business at around $44.8bn.
The deal excludes Unilever’s foods assets in India, Nepal and Portugal. It also does not take in the group’s lifestyle nutrition business, the company’s Buavita unit and its Lipton ready-to-drink operations.
Under the terms of the transaction, Unilever and its investors will receive a mix of McCormick’s existing voting and non-voting common stock, equating to 65% of the combined business.
When the deal is closed, Unilever shareholders are expected to own 55.1% of the enlarged group, McCormick shareholders 35% and Unilever 9.9%.
The FMCG major will also receive $15.7bn in cash, subject to certain closing adjustments.
Unilever, which has been retreating from food for a number of years, said the deal was “another decisive step to reshape Unilever into a simpler, sharper, higher growth company”.
McCormick, home to brands including Schwartz spices and Cholula hot sauce, said the move the new company is “expected to benefit from expanded global reach, enhanced scale across retail and foodservice channels and greater resources to invest in innovation, brand-building and global distribution”.
The combined company will be led by McCormick CEO Brendan Foley and CFO Marcos Gabriel, with “senior management representation” from Unilever’s food business.
McCormick will retain its existing name, its HQ in Maryland and its NYSE listing. The Ducros brand owner will establish an international headquarters in the Netherlands and is planning a secondary listing in Europe.
The companies said the new business expected to generate around $600m of “annual run-rate cost synergies net of growth reinvestments”.
The synergies are projected to be captured over a three-year period. Around two-thirds would be found by the end of year two, “driven by procurement, manufacturing and SG&A”, McCormick said.
It added: “Approximately $100m incremental cost and revenue synergies will be reinvested to further drive growth.”
Foley, McCormick’s chairman, president and CEO, said the company had “long admired” Unilever’s food business.
He added: “Together, we will be better positioned to accelerate growth in attractive categories. This combination will create a diversified flavour leader with a robust growth profile that remains differentiated by its focus on flavouring calories while others compete for them.”
Unilever CEO Fernando Fernandez said the deal is “another decisive step in sharpening our portfolio and accelerating our strategy towards high-growth categories”.