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McCormick & Co. Inc. entered into an $4.2 billion agreement to acquire Reckitt Benckiser’s Food Division. The deal will strengthen McCormick’s footprint in the fast-growing condiment sector through the addition of Frank’s RedHot® Hot Sauce, French’s® Mustard and Cattleman’s® branded products.The deal, expected to close third of fourth quarter 2017, also includes the acquisition of the nutrition bar brand Tiger’s Milk.
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. Once the transaction is completed, French’s and Frank’s RedHot brands will become McCormick’s No. 2 and No. 3 brands, respectively, and advance McCormick from the No. 10 position to a leading position in the U.S. condiment category.
Lawrence E. Kurzius, chairman, president and CEO of McCormick, said RB Foods’ focus on creating products with simple, high-quality ingredients makes it a perfect match for McCormick as it continues to capitalize on the growing consumer interest in healthy, flavorful eating. “The addition of Frank’s RedHot Hot Sauce, the clear consumer favorite in an attractive and high-growth category, French’s Mustard and the other beloved products enables McCormick to become a one-stop shop for condiment, spice and seasoning needs, providing our customers and consumers with an even more diverse and complete flavor product offering," Kurzius said.
McCormick anticipates that the hot sauce category will continue to see robust growth, and with insight-driven innovation and a passionate and increasing fan base, there are significant opportunities for expansion. McCormick’s growing global Millennial household penetration is expected to create substantial upside for Frank’s RedHot and the other acquired brands, increasing their respective consumer bases. 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.
The deal also strengthens McCormick’s position in the foodservice market where Reckitt Benckiser foods’ brands hold attractive positions across hot sauce, mustard, crispy vegetable and barbeque sauce sectors through the U.S. and Canadian foodservice channels.
The sale of its food division allows Reckitt Benckiser to focus on the global health and hygiene sector, which is growing because of its June 2017 acquisition of the Mead Johnson Nutrition Co. The deal moved Reckitt Benckiser into the global market leadership position in consumer health and hygiene. 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.
Commenting on the sale, Reckitt Benckiser CEO Rakesh Kapoor said: “Following the acquisition of Mead Johnson Nutrition, this transaction marks another step toward 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."
A Bounty of Mega Mergers & Acquisitions
The past few years have seen mega deals change the playing field of the food and beverage industry at both the CPG and retail levels.
Campbell Soup Co. this month entered an agreement to acquire Pacific Foods for $700 million in cash. The deal, Campbell’s fifth acquisition in five years, is the latest in a series of moves it’s made to diversify its portfolio in response to increased consumer interest in health and well-being. The company acquired Bolthouse Farms in 2012 for $1.55 billion, and Plum Organics baby foods and biscuit company Kelsen in 2013, and fresh salsa and hummus maker Garden Fresh Gourmet in 2015.
In June 2017, Amazon moved to gobble up No. 1 natural and organic foods retailer Whole Foods Market Inc. in an all-cash transaction valued at approximately $13.7 billion. The deal, expected to close during the second half of 2017, signals times are changing for the grocery retail sector. The blockbuster deal—the largest in Amazon’s 23-year history—will allow the e-commerce giant to expand its online presence and accelerate its brick-and-mortar grocery retail strategy. Whole Foods is facing a growing number of shareholder lawsuits over the Amazon deal.
In April 2017, Danone completed its $12.5 billion acquisition of WhiteWave Foods. The deal boosted Danone’s presence as a global leader strongly addressing tomorrow’s consumer trends by providing healthy and sustainable eating and drinking options. The transaction further diversifies Danone’s portfolio and broadens its presence in North America by creating a leading U.S. refrigerated dairy player, as well as one of the top 15 largest U.S. food and beverage manufacturers.
In October 2016, Anheuser-Busch InBev finalized its $105 billion acquisition of SABMiller that created the world’s largest beer company with nearly 30-percent market share, approximately $66 billion in combined annual revenues and nearly $12 billion in net income.
In 2015, Heinz and Kraft Food entered into a nearly $36 billion monster deal that formed the third-largest food and beverage company in North America and the fifth-largest in the world. The company now operates under the Kraft Heinz moniker. In February 2017, Unilever rejected a $143 billion takeover offer from Kraft Heinz, a mega deal that would have created the world’s second largest consumer goods company behind market leader Nestlé S.A. The deal would have added Unilever’s iconic food and beverages brands Hellmann’s, Knorr and Lipton to the Kraft Heinz portfolio.
In 2015, General Mills unloaded its Green Giant and Le Sueur frozen and canned vegetable brands to B&G Foods for $765 million. The sale was part of General Mills’ strategic priority to shape its portfolio for growth, focusing its resources on the brands, categories and geographic markets that have the greatest future growth opportunities like cereal and yogurt, as well as its organic and natural foods segment.
In 2015, Coca-Cola completed its $2.15 billion purchase of Monster Beverage that brought the Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice brands under Coke's ownership.