McCormick's French's Deal Turns Up The Heat Global M&A Food Fight

McCormick's French's Deal Turns Up The Heat Global M&A Food Fight”

It said it would integrate the business, RB Foods, into its consumer and industrial segments, and retain the top brand names like French's, Frank's RedHot and Cattlemen's.

According to a press release, Frank's RedHot sauce and French's Mustard are both No. 1 in their respective categories in the US and Canada. "RB Foods' focus on creating products with simple, high-quality ingredients makes it a ideal match for McCormick as we continue to capitalize on the growing consumer interest in healthy, flavorful eating".

The money will be used to pay of debt accrued when Reckitt bought Mead Johnson, a baby formula maker, for $17.9bn.

The deals have included acquisitions of smaller, faster-growing brands or merging with companies that allow for cost-cutting through the combination of manufacturing and distribution lines.

McCormick & Co agreed the deal after previous hopefuls, Anglo-Dutch giant Unilever and Spam-maker Hormel Foods, decided not to bid, says the Financial Times. The addition of Mead Johnson's infant and children's nutrition business is expected to increase Reckitt Benckiser's revenues in consumer health by approximately 90 percent and increase its developing market scale by approximately 65% percent.

According to McCormick the deal was expected to achieve "meaningful accretion" to margins and adjusted earnings per share, excluding transaction and integration costs.

Reckitt's food business includes French's mustard and boasts profit margins that are "high by industry standards" at almost 29 per cent.

French's and Frank's RedHot will become McCormick's second- and third-largest brands, respectively, CEO Lawrence E. Kurzius said in a statement late Tuesday.

The deal represents a success for the firm after a failed bid to buy Premier Foods previous year. McCormick plans to fund the deal with a combination of equity and debt, and said it has obtained committed bridge financing.

McCormick projects robust growth that the hot sauce category is experiencing would continue.

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