McCormick & Company Inc shares fell after it announced the acquisition of Unilever plc's foods business in a cash and shares deal to create a company worth about US$65 billion (A$94.4 billion).
McCormick will pay $15.7 billion in cash and $29.1 billion in shares, giving Unilever shareholders 55.1% of the combined company, Unilever 9.9% and McCormick shareholders the balance.
The companies said the merged business would have leading brands including McCormick flavours and seasoning, Knorr meal bases and Hellmann’s mayonnaise and high potential brands including Cholula hot sauces and Maille and Frank’s condiments.
“The combination of Unilever’s Foods business with McCormick will create a global flavour powerhouse anchored in a portfolio of iconic brands across herbs, spices, seasonings, cooking aids, sauces and condiments,” they said in a media release.
London-based Unilever said the transition would position it as a leading pure-play home and personal care (HPC) company.
Chief Executive Officer Fernando Fernandez said the transaction was another decisive step in sharpening its portfolio and accelerating its strategy towards high-growth categories.
“We are unlocking trapped value through a growth-led separation of Foods, creating a scaled, global flavour powerhouse,” he said.
McCormick Chief Executive Officer Brendan Foley said his company had long admired the Unilever Foods business with a portfolio that complemented McCormick’s business, capabilities and long-term vision.
"This transformative combination accelerates McCormick’s strategy and reinforces our continued focus on flavour,” he said.
But investors in McCormick (NYSE: MKC) choked on the deal with its share price closing $3.28 (6.11%) down at $50.44, valuing the company at US$13.55 billion.
Unilever shares (LON: ULVR) closed £31.87 (0.70%) higher at £4,560.37 on Tuesday, capitalising the company at £99.80 billion (US$131.7 billion), after falling 7% to as low as £4,197 at one stage before later rallying.
This is the second-largest food transaction in history, behind the Kraft Heinz merger of 2015.
