Unilever is in “advanced” discussions to combine its food business with US spices and sauces group McCormick, the FMCG giant confirmed today (31 March).
The Hellmann’s maker said a cash-stock deal could be agreed today, with its shareholders expected to retain a 65% stake in the combined group.
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However, Unilever also stressed there was no guarantee a deal would be reached.
“Work remains ongoing to agree and finalise a transaction and it is possible that an agreement could be concluded today, although there can be no certainty that a transaction will be agreed,” the group said.
In an exchange filing, the Knorr owner disclosed a potential transaction would be settled in around $15.7bn of upfront cash, with the remainder in McCormick equity.
It would be executed via a Reverse Morris Trust transaction, intended to be “tax-free” to the company and its shareholders, according to the filing.
The deal would exclude parts of Unilever’s foods portfolio, including its business in India.
“Full terms will be announced if a transaction is agreed,” the Knorr owner said.
A tie-up would unite McCormick’s herbs and seasonings, French’s mustard and Frank’s RedHot sauce with Unilever food brands including Hellmann’s, Knorr cooking aids and Colman’s mustard.
McCormick, the owner of Cholula hot sauces, also acknowledged the talks earlier this month but said there was no certainty a deal would be struck.
The proposed McCormick deal would extend Unilever’s long-running retreat from food, with the sale of brands such as Skippy and Slim-Fast to larger divestments in areas such as spreads, tea and, most recently, ice cream.
In December, Unilever completed the spin-off of its ice-cream arm, now The Magnum Ice Cream Company.
Last year, Unilever’s underlying group sales rose 3.5%, with food up 2.5%. Food now accounts for about a quarter of the group’s €50.5bn ($58.06bn) annual turnover.
