In a week where speculation re-emerged over the future of Unilever’s food business, the CPG giant has 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.
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 brands owner said today (20 March).
“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 this week, Bloomberg reported Dove soap and Lynx deodorants owner Unilever was weighing up a separation of its assets in food. The publication said the deliberations were in their early stages and featured a number of options, including separating all its assets in food, or just some of them.
Unilever, 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.
Elsewhere, The Financial Times reported Unilever had held discussions with 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 hot sauces maker said in its statement.
“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 disposals 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 circa €3.2bn of underlying EBITDA. By the 2027 fiscal year, we estimate the food business should generate circa €3.5bn of underlying EBITDA.
“Assuming circa €350m-400m of separation costs and dis-synergies in 2027 were a demerger to take place, this would bring the food division to circa €3.1bn of 2027 adjusted EBITDA.”
