McCormick acquires Unilever’s food business in US$45B deal

This Tuesday Nov. 24, 2020 photo shows the logo for McCormick & Co. AP Photo/Donald King, File)

NEW YORK — Spice and flavourings company McCormick announced on Tuesday that it’s combining with Unilever’s foods division, which includes brands like Hellmann’s and Knorr.

The merger is the latest in a string of actions in the packaged food sector, as companies contend with inflation and changing consumer tastes. Last year, both Keurig Dr Pepper and Kraft Heinz announced plans to unwind huge mergers, although Kraft later put that plan on hold. Mars recently bought Cheez-It maker Kellanova while Nutella maker Ferrero bought WK Kellogg.

The combined company will maintain McCormick’s name and leadership. But upon closing, Unilever and its shareholders are expected to own 65 per cent of the food company’s outstanding equity, amounting US$29.1 billion. Unilever would also get $15.7 billion in cash. Meanwhile, McCormick shareholders will own 35.0 per cent.

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McCormick and its red-capped array of spices is a $15 billion company and the stable of brands it’s adding from Unilever are worth billions more. The companies said on Tuesday that McCormick and Unilever would have a combined revenue of $20 billion for the 2025 fiscal year.

McCormick said the deal will give it better access to high-growth regions like Latin America and Asia, where Unilever has an extensive presence. It will also expand Unilever’s footprint in North America, where McCormick has a stronger profile.

The companies expect to grow their presence in food service. Unilever has traditionally been a stronger player in restaurant kitchens, while McCormick’s products are often found more in the dining room, on tables.

The combined companies said they expect to generate $600 million in annual cost savings.

“Together, we will be better positioned to accelerate growth in attractive categories,” McCormick CEO Brendan Foley said in a prepared statement.

The transaction is expected to close by mid-2027, the companies said Tuesday, pending both shareholder and regulatory approval. The deal excludes Unilever’s food business in India, Nepal and Portugal.

Unilever, which is based in London, was founded nearly a century ago when Dutch margarine maker Margarine Unie merged with British soap maker Lever Brothers. The conglomerate now makes dozens of different brands, including Dove soap, Vaseline, Hellmann’s mayonnaise, Liquid I.V. hydration, Axe body spray and Pepsodent toothpaste.

In recent years, Unilever has been shifting away from food in favor of beauty and wellness categories, where it sees more potential for growth.

“For Unilever, this transaction is another decisive step in sharpening our portfolio and accelerating our strategy towards high-growth categories,” Unilever CEO Fernando Fernandez said in a statement.

In 2024, Unilever announced it was spinning off its ice cream business, which included the Ben & Jerry’s, Magnum and Breyers brands. That business became the Magnum Ice Cream Co., which is based in Amsterdam. Last year, Unilever sold The Vegetarian Butcher, a plant-based meat brand, and Graze, a healthy snacking brand.

Unilever’s food sales, which make up one-quarter of its total sales, fell by 3% last year. Many packaged food companies have been hurt in recent years as consumers shift to cheaper store brands or less processed foods.

McCormick, based in Hunt Valley, Maryland, has been expanding its portfolio to take advantage of consumers’ growing interest in global flavors and sauces. The 137-year-old company bought Reckitt Benckiser’s food division -- including the French’s mustard and Frank’s RedHot sauce brands -- in 2017. In 2020, it bought Cholula, a Mexican hot sauce brand.

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Foley said spices and flavors have remained resilient, transcending age, culture, dietary preferences and income levels. McCormick’s net sales grew two per cent last year.

“Flavor is fully aligned with today’s health and wellness priorities, as consumers increasingly focus on cooking at home, adding more protein and produce and pursuing healthier lifestyles,” Foley said Tuesday during a conference call with investors.

Unilever shares fell six per cent Tuesday afternoon while McCormick’s shares slid five per cent.

Max Gumport, a senior analyst for BNP Paribas Equity Research, said in a note to investors that McCormick has a strong track record with previous acquisitions. But he said investors are likely concerned about the complexity of the merger and the high number of recent deals in the food industry.

Wyatte Grantham-philips And Dee-ann Durbin, The Associated Press