McCormick to Acquire Reckitt Benckiser's Food Division

McCormick to Acquire Reckitt Benckiser's Food Division

Acquisition adds Frank's RedHot Hot Sauce, French's Mustard and other iconic, market-leading products to McCormick's product line.

July 21, 2017
Industry News & Company Inc., a global leader in flavor, today announced that it has signed a definitive agreement to acquire Reckitt Benckiser's Food Division ("RB Foods") from Reckitt Benckiser Group plc for $4.2 billion, subject to certain customary purchase price adjustments.

RB Foods is a leader in the growing U.S. condiments market, with a portfolio of iconic brands and a loyal consumer following. Frank's RedHot Hot Sauce, French's Mustard, French's Crispy Vegetables and Cattlemen's BBQ Sauce have all captured attractive market share positions in their respective categories. Frank's RedHot has a passionate consumer following and is the number one brand in its market in the U.S and Canada, with growth outpacing the category. French's Mustard is also number one in its category in the U.S. and Canada.

"The acquisition of RB Foods strengthens McCormick's flavor leadership with the addition of the iconic French's and Frank's RedHot brands to its portfolio, which will become its number two and number three brands, respectively," said Lawrence Kurzius, chairman, president and chief executive officer. "RB Foods' focus on creating products with simple, high-quality ingredients makes it a perfect match for McCormick as the company continue to capitalize on the growing consumer interest in healthy, flavorful eating. The addition of Frank's RedHot Hot Sauce, the clear consumer favorite in an attractive and high-growth category, French's Mustard and the other beloved products enables McCormick to become a one-stop shop for condiment, spice and seasoning needs, providing its customers and consumers with an even more diverse and complete flavor product offering. RB Foods' track record of creating market-leading products and its dedicated state-of-the-art manufacturing facility are a strong complementary fit that the company expect will strengthen McCormick's business opportunities as the company expand its presence in condiments, a core category for the Company in the U.S. and internationally.

"This transaction reinforces its focus on growth, reflecting McCormick's commitment to making every meal and moment better and driving significant shareholder value,” he added. “We have great respect for RB Foods and the strong business its employees have built. McCormick will be able to grow these brands in new and unique ways through its proven track record of insight-driven innovation and the ability to leverage its global footprint. the company are confident McCormick is the perfect home for RB Foods'popular brands and employees."

McCormick anticipates that the hot sauce category will continue to see robust growth, and with insight-driven innovation and a passionate and increasing fan base, there are significant opportunities for expansion. The company expects McCormick's growing global millennial household penetration to create substantial upside for Frank's RedHot and the other acquired brands, increasing their respective consumer bases. McCormick also expects revenue synergies as a result of leveraging seasonal Holiday promotions and Grilling events that include other McCormick iconic products like Lawry's, Grill Mates and its other global branded spices, herbs and extracts.

In addition to retail, RB Foods' brands have attractive positions across hot sauce, mustard, crispy vegetable and bbq sauce sold through the U.S. and Canadian foodservice channels. The company expects these products to build upon its industrial segment growth by increasing the size of that segment's foodservice sales by over 50% in the U.S. and Canada. McCormick also expects to leverage its international infrastructure, which already includes condiment consumer insight, sales and supply chain expertise, to significantly expand the global presence of Frank's RedHot and French's, which the company expects will result in substantial growth and increased household penetration. As a result of increased scale, McCormick expects to achieve cost synergies of approximately $50 million, the majority of which will be achieved by 2020, with anticipated synergies split between selling, general and administrative expenses and cost of goods sold. With the addition of RB Foods' business, McCormick expects to achieve meaningful accretion to its margins and adjusted earnings per share, excluding transaction and integration costs, and will achieve additional favorable impacts following the realization of targeted synergies.

The transaction is expected to be completed in the third or fourth quarter of McCormick's fiscal 2017. The transaction is subject to customary closing conditions, including applicable regulatory approvals. McCormick has obtained committed bridge financing and expects to permanently finance the transaction through a combination of debt and equity.  

Upon closing of the acquisition, McCormick's leverage ratio will increase, but the company is committed to maintaining an investment grade credit rating and returning to its current credit profile over the longer term. As part of this commitment, McCormick will maintain its dividend policy, curtail its share repurchase program and will deleverage the balance sheet with anticipated strong cash flow generation.