McCormick to combine with Unilever’s Foods business

McCormick & Company (MKC) and Unilever (UL) announced that they have entered into an agreement to combine McCormick with Unilever’s Foods business excluding India and other excluded businesses, creating a global flavor leader in attractive and high-growth categories with approximately $20B in combined fiscal year 2025 revenue. Under the terms of the agreement and upon closing of the transaction, Unilever and its shareholders are expected to receive shares equating to 65.0% of the fully diluted combined-company outstanding equity, equivalent to $29.1B based on McCormick’s one-month volume-weighted average price of $57.84. Unilever will also receive $15.7B in cash, subject to certain closing adjustments. This implies an Enterprise Value for Unilever Foods of approximately $44.8B, or approximately 13.8x fiscal year 2025 EBITDA. In addition, this reflects an enterprise value for McCormick of approximately $21B, or approximately 13.8x fiscal year 2025 EBITDA. Upon closing of the transaction, Unilever shareholders are expected to own 55.1%, McCormick shareholders will own 35.0% and Unilever is expected to own 9.9% of the fully diluted combined-company outstanding equity. The transaction is not expected to give rise to U.S. federal income tax for Unilever or its shareholders, thereby mitigating some of the overall tax costs associated with the transaction. The combined company expects to realize approximately $600 million in run-rate annual cost synergies, net of growth reinvestments. These cost synergies are projected to be captured over a three-year period, with approximately two-thirds of the synergies realized by the end of year two, driven by procurement, manufacturing and SG&A. One-time expenditures to achieve these synergies are estimated to be approximately $300M. Approximately $100M incremental cost and revenue synergies will be reinvested to further drive growth. The transaction is expected to close by mid 2027, subject to McCormick shareholders’ approval, receipt of required regulatory approvals and the satisfaction of other customary closing conditions. Works council consultation will be conducted prior to the closing of the transaction.