Unilever confirmed it is in talks to sell its food business to McCormick & Co, a deal that would allow the Hellman's mayonnaise owner to focus on its faster-growing personal care business while enabling the flavor giant to expand its branded portfolio in retail.
In separate statements, both companies said that while discussions are ongoing, there is no certainty that a deal will be reached. Talks were first reported by The Wall Street Journal.
A merger between Unilever’s food business and McCormick would create a food and flavorings giant with billions of dollars in annual sales. The combined business would include everything from McCormick’s red and white containers of spices, along with other major brands, including Frank's RedHot, French’s Mustard, Hellmann’s mayonnaise and Knorr sauces and seasonings.
Purchasing Unilever's food business would be the largest deal in McCormick’s 137-year history and position it as a bigger rival to other condiment giants, including Kraft Heinz and Nestlé. Bloomberg estimated Unilever’s food business has a potential equity value of $33 billion, far exceeding McCormick’s $14.5 billion market cap.
“McCormick regularly evaluates its portfolio and strategic options in pursuit of maximizing shareholder value,” the Maryland company said.
The possibility of a deal between the two firms makes sense, according to an analyst note from BNP Paribas. But a “crucial” issue for McCormick will be the financial structure of the transaction.
“Strategically, we believe this deal could make sense for [McCormick],” according to the analyst note. “The company has demonstrated an interest in expanding its emerging market exposure and extending its category perimeter.”
For Unilever, a sale would be the latest step in its push to slim down its portfolio and focus on its household and personal care division, which includes Dove soap and Axe deodorant. Last year, Unilever spun off its ice cream business, which is home to Talenti, Klondike and Ben & Jerry’s.
“The [Unilever] Board believes Foods is a highly attractive business, with a strong financial profile led by market-leading brands in growing categories,” Unilever said.
