Schwartz owner spices up company with Reckitt deal

20 July, 2017, 00:52 | Author: Celia Hoffman
  • The Frank's Red Hot Hot Sauce Bottle rings the closing bell at NASDAQ Market Site

The maker of Old Bay has a few new properties.

McCormick & Co Inc said it would buy the food business of British consumer goods conglomerate Reckitt Benckiser Group Plc for $4.2 billion to expand its footprint in the attractive condiments category.

The Maryland-based company fought off rival bidders to purchase the Reckitt Benckiser food business.

The blockbuster deal shoots McCormick from the tenth largest condiment maker in the U.S.to one of the largest, company officials said.

In the United States and Canada, Frank's RedHot holds the No. 1 position in the fast-growing hot sauce category, while French's Mustard is No. 1 in its category. The company employs 450, including some 360 in Springfield, Missouri.

In acquiring Reckitt's food business, McCormick faced a large group of potential rivals.

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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.

McCormick saw off competition from Unilever and Hormel Foods, the U.S. owner of Spam, to buy the division.

It's the latest in a string of big deals for McCormick. With 411 million pounds ($536 million) in sales a year ago, French's Foods accounted for 4 percent of Reckitt's total revenue. The company went after another United Kingdom business in 2016, when it considered buying Premier Foods. The company also expects revenue synergies as a result of leveraging seasonal holiday promotions and grilling events that include other McCormick brands including Lawry's®, Grill Mates® and its global branded spices, herbs and extracts.

Rakesh Kapoor, chief executive of RB, said: "Our French's Food business is a true reflection of RB's strengths - a portfolio of great brands driven through a culture of innovation by passionate people to deliver consistent outperformance".

She said the deal offers "plenty of opportunities" for McCormick to get costs down and increase profits, "a key focus area for many multinationals this year especially within staple foods".

The market reaction suggests that investors think McCormick may have paid too-high a price.

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