British consumer health giant Reckitt Benckiser Group PLC has agreed to offload its sauces division to US spicemaker McCormick & Co Inc for US$4.2 billion, the groups said yesterday.
“Reckitt Benckiser Group PLC is pleased to announce that it has entered into an agreement to sell its food business, including the French’s, Frank’s RedHot and Cattlemen’s brands, to McCormick & Company Inc,” Reckitt said in a statement after a strategic review.
The price reflects “the quality of this highly profitable, growth business,” it added.
The deal will hand McCormick a leading position in the condiments sector in the US. It is currently the 10th-biggest player.
The Maryland-based group’s top US brands include McCormick, Grill Mates and McCormick Gourmet. It also sells Schwartz seasoning in Britain and Ducros in France.
Reckitt brands include French’s mustard and Frank’s RedHot sauce, which are to become McCormick’s second and third-biggest sellers respectively.
McCormick shares on Tuesday dropped 0.1 percent in New York before the announcement and have gained about 4 percent this year.
Reckitt stock early yesterday rose 2 percent in London, extending its increase for the year to 16 percent.
The deal comes as speculation swirls about the next round of consolidation in the packaged food business.
In February, Kraft Heinz Co was spurned in a blockbuster bid to take over Unilever PLC, the British-Dutch maker of Hellmann’s mayonnaise and Knorr soup. In the aftermath, Unilever was cited by analysts as a possible bidder for the Reckitt business.
Nestle SA, the world’s largest food company, is also shaking up its portfolio. Under activist pressure to improve results, it is considering selling its US candy operations.
Investor Nelson Peltz’s Trian Fund Management earlier this week set its sights on Procter & Gamble Co, the US giant that competes with Unilever in personal care.
Reckitt’s food unit was “a strong complementary fit that we expect will strengthen McCormick’s business opportunities as we expand our presence in condiments, a core category for the company in the US and internationally,” McCormick CEO Lawrence Kurzius said in a separate statement.
The divestment follows Reckitt’s purchase of US infant and child nutrition specialist Mead Johnson Nutrition Co in February for US$16.6 billion.
That deal took Reckitt, whose brands include Durex condoms and Nurofen painkillers, into the baby food market for the first time — and targeted rapid expansion in fast-growing Asian markets such as China.
“Following the acquisition of Mead Johnson Nutrition, this transaction marks another step towards transforming RB [Reckitt Benckiser] into a global leader in consumer health and hygiene,” Reckitt CEO Rakesh Kapoor said.
The deal is to create a combined group with annual sales of about US$5 billion.
Additional reporting by Bloomberg
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