In a week where speculation reemerged over the future of Unilever’s food business, the CPG giant confirmed it is in disposal talks with McCormick & Co.
US-based McCormick also issued an acknowledgment, saying in a statement it is “engaged in discussions with Unilever regarding a potential strategic transaction” for the food assets.
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A deal would combine brands such as McCormick’s namesake line of herbs and seasonings, French’s mustard and Frank’s RedHot sauce with Unilever’s Hellmann’s mayonnaise, Knorr cooking aids and Colman’s mustard.
In a statement, Unilever said it was responding to overnight media reports suggesting the two company’s were in conversation over the assets.
“Unilever confirms that it has received an inbound offer for its foods business and is in discussions with McCormick & Company, Inc. There can be no certainty that any transaction will be agreed,” the Marmite and Horlick’s brand owner said.
“The board believes foods is a highly attractive business, with a strong financial profile led by market-leading brands in growing categories and is confident in the future of the foods business as part of Unilever.”
Earlier in the week, Bloomberg reported, quoting unnamed sources, that Unilever was in talks with potential buyers for some or all of its food assets, though the publication noted a deal was unlikely to be struck before 2027.
The company, which completed the spin-off of its ice-cream business in December – now The Magnum Ice Cream Company – declined to comment on the Bloomberg article when contacted by Just Food.
Another media report also emerged this week from the Financial Times, saying Unilever had held discussions with a food peer of McCormick’s, Kraft Heinz, over a potential combination of their food assets.
However, the talks had since ended, the FT’s sources claimed.
Kraft Heinz was in the process of splitting into two separate food entities, plans that stretched back to September, before it paused those plans in February under its newly appointed CEO Steve Cahillane.
Like Unilever, McCormick also said there was no guarantee a deal would be struck.
“While these discussions are ongoing, there can be no certainty or assurances as to whether an agreement for a transaction will be reached or as to the terms or timing of any such transaction,” the Cholula spicey sauces maker said in a statement today (20 March).
“McCormick regularly evaluates its portfolio and strategic options in pursuit of maximising shareholder value and consistent with its fiduciary duties and in consultation with its financial and legal advisors.”
Aside from ice cream, Unilever has been trimming its food portfolio elsewhere with the disposal of Graze, The Vegetarian Butcher and Unox.
Last year, Unilever’s group underlying sales rose 3.5%. From food, they increased 2.5%. The food division now accounts for just a quarter of Unilever’s €50.5bn ($58.06bn) annual turnover.
An exit from food and a focus on home and personal care would boost the group’s organic growth.
Barclays’ analyst Warren Ackerman wrote this week: “It would make its 4-6% organic-sales-growth algo less of a stretch weighed down by a foods business which is unlikely to grow more than 2-3%. An exit of foods would free up resources for Unilever to double down on its health and wellbeing and personal-care strategy.”
Ackerman estimated Unilever’s food assets would be worth around nine or ten times its adjusted 2027 EBITDA.
Explaining his thoughts, Ackerman wrote: “In 2025, Unilever’s food division generated c.€3.2bn of underlying EBITDA. By FY27E, we estimate the food business should generate c.€3.5bn of underlying EBITDA.
“Assuming c.€350m– 400m of separation costs and dis-synergies in 2027 were a demerger to take place, this would bring the food division to c.€3.1bn of FY27E adj. EBITDA.”
