McCormick to Acquire Reckitt Benckiser's Food Division for $4.2 Billion

By WSJ Staff 

McCormick & Co. (MKC) said late Tuesday it agreed to acquire Reckitt Benckiser Group PLC's (RB.LN) food division for $4.2 billion, the latest in a wave of deal activity in the global packaged-foods sector.

The Sparks, Md., spice maker said it would integrate the U.K. consumer-goods company's RB Foods business--whose products include French's mustard and Frank's RedHot hot sauce--into its commercial and industrial segments.

McCormick, whose brands include Lawry's and Grill Mates, said it expects combined pro forma 2017 annual net sales of about $5 billion, with significant margin accretion. It also projects the deal will result in cost synergies of around $50 million, the majority of which will be achieved by 2020.

The company said it had obtained bridge financing and expects to finance the transaction through a combination of debt and equity.

Though McCormick's leverage ratio will increase because of the deal, the company plans to maintain its dividend policy and curtail its share-buyback program in an effort to maintain its investment-grade credit rating, it said. The company also said it would deleverage its balance sheet with anticipated strong cash-flow generation.

McCormick said it expects the deal to be completed in the fiscal third or fourth quarter of 2017. Credit Suisse and Cleary Gottlieb Steen & Hamilton LLP are serving as financial adviser and legal counsel, respectively, to McCormick, the company said.

In February, Reckitt Benckiser Group agreed to acquire baby-food maker Mead Johnson Nutrition Co. for $16.6 billion.

The British consumer-goods behemoth Unilever PLC (ULVR.LN), which earlier this year rejected Kraft Heinz Co.'s $143 billion takeover bid, has said it is planning to unload its margarine-and-spreads business.

Switzerland's Nestle SA (NESN.EB) last month put its U.S. confectionery business up for sale. In May, Conagra Brands Inc. (CAG), owner of Slim Jim jerky and Chef Boyardee canned pasta, agreed to sell its Wesson cooking-oil brand to J.M. Smucker Co. (SJM).

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July 19, 2017 00:28 ET (04:28 GMT)

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