US-based spice manufacturer McCormick & Company has agreed to acquire the food division of British consumer goods firm Reckitt Benckiser (RB) for $4.2bn to strengthen its flavor and condiments portfolio.
The acquisition of RB Foods includes brands like French's Mustard, Frank's RedHot Hot Sauce and Cattlemen's. McCormick will retain their brand names and plans to integrate RB Foods into its consumer and industrial segments.
For Reckitt Benckiser, the sale of its food business is part of its strategy to help in reducing its debt following its $16.6bn acquisition of Mead Johnson.
Reckitt Benckiser CEO Rakesh Kapoor said: "Following the acquisition of Mead Johnson Nutrition, this transaction marks another step towards transforming RB into a global leader in consumer health and hygiene, ensuring we continue to deliver for shareholders and give people innovative solutions for healthier lives and happier homes."
According to McCormick chairman, president and CEO Lawrence E. Kurzius, the acquisition of RB Foods consolidates McCormick's position in the flavor segment with the addition of the French's and Frank's RedHot brands.
Kurzius added: “RB Foods' focus on creating products with simple, high-quality ingredients makes it a perfect match for McCormick as we continue to capitalize on the growing consumer interest in healthy, flavorful eating.
“RB Foods' track record of creating market-leading products and its dedicated state-of-the-art manufacturing facility are 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 U.S. and internationally.”
McCormick expects its consolidated portfolio to generate $5bn in annual net sales in 2017. It also anticipates the acquisition to bring in cost synergies of nearly $50m, the majority of which it says will be achieved inside the next three years.
The total consideration price for the acquisition could change depending on customary working capital adjustments at the time of its completion. Based on receipt of certain regulatory approvals, the acquisition is likely to close during the third quarter.
