McCormick is buying Unilever's food business in a $45 billion deal

McCormick and Unilever announced March 31 that they have entered into an agreement to combine McCormick with Unilever’s foods business, in a deal that implies an enterprise value of approximately $44.8 billion for the Unilever unit.

Under the terms of the agreement, Unilever and its shareholders will receive stock equating to 65% of the fully diluted combined company’s equity, valued at $29.1 billion based on McCormick’s one-month volume-weighted average stock price. Unilever will also receive $15.7 billion in cash. Upon closing, Unilever shareholders are expected to own 55.1% of the combined company, McCormick shareholders 35%, and Unilever itself 9.9%.

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The combined company would have approximately $20 billion in fiscal year 2025 revenue. Unilever Foods’ portfolio is led by Knorr and Hellmann’s, which together account for roughly 70% of the unit’s sales. McCormick’s existing brands include French’s, Frank’s RedHot, Cholula, OLD BAY, and Lawry’s.

McCormick will fund the $15.7 billion cash payment through a combination of cash on hand and new debt. The company has received committed bridge financing from Citigroup $C -0.10%, Goldman Sachs $GS +0.59%, and Morgan Stanley $MS +1.43%. At closing, the combined company’s net leverage is expected to be 4.0x or less, with a target of returning to 3.0x within two years.

The two companies expect to realize approximately $600 million in annual run-rate cost synergies, net of reinvestments, by the end of year three following the close. One-time costs to achieve those savings are estimated at approximately $300 million.

McCormick will retain its name, its global headquarters in Hunt Valley, Maryland, and its NYSE listing. The combined company will establish an international headquarters in the Netherlands and plans a secondary stock listing in Europe.

Brendan Foley will remain chairman, president, and chief executive of McCormick. Unilever will appoint four of the 12 members of the combined company’s board of directors.

For Unilever, the transaction is part of a broader strategy to shed its food operations and focus on personal care and home care products. The deal follows Unilever’s spinoff of its ice cream business, according to CNBC and represents the company’s biggest portfolio shake-up since its founding nearly a century ago, according to the Wall Street Journal.

After the separation, Unilever expects to operate as a personal care and home care company with approximately €39 billion in revenue.

The deal uses a Reverse Morris Trust structure and should not create U.S. federal income tax for Unilever or its shareholders. Both boards have approved the deal, which is expected to close by mid-2027, pending approval from McCormick shareholders and regulators.

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