Reckitt Benckiser To Sell Food Business For USD4.20 Billion

Jul 20, 2017, 00:51
Reckitt Benckiser To Sell Food Business For USD4.20 Billion

McCormick has said it wants to strip out around $50 million in cost "synergies" after the takeover, the majority of which would be achieved by 2020.

The sale, announced late on Tuesday, will reduce Reckitt's net debt to EBITDA ratio to 3.3 times from 4.1 times. Reckitt Benckiser's brands include Enfamil, Nutramigen, Clearasil, Lysol, Veet, Calgon, Woolite and Air Wick.

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

The UK maker of French's mustard, Nurofen and Durex condoms is poised to offload its food division to U.S. consumer good firm McCormick.

More news: Skydiver texts wife to say he won't pull cord when jumping

Packaging company RPC was also among top mid-cap gainers, up 3.9 percent at a four-month high after its first quarter revenue came in ahead of a year ago, helped by acquisitions and favourable currency movements.

The company said in April that its foods business is "nevertheless non-core to RB", the Financial Times reported.

Reckitt's shares were up 1.4 per cent to £79.21 this afternoon.

"McCormick's acquisition of Reckitt's food arm brings the company very close to Kraft Heinz's leadership position in sauces, dressings and condiments in the USA, with now just two percentage point difference in share", said Lianne van den Bos, senior food analyst at Euromonitor International.

More news: Jaguar E-Pace unveiled in the UK

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. It also attempted to acquire Premier Foods (which owns brands like Oxo) a year ago, but that bid was refused.

Industry insiders said Reckitt Benckiser wanted to sell its food business to help pay for its $16.6 billion acquisition of infant formula maker Mead Johnson.

Credit Suisse is advising McCormick on the deal, while Cleary Gottlieb Steen & Hamilton LLP is the legal counsel.

The companies expect the deal to close in the autumn, subject to regulatory approvals.

More news: Most Republicans say higher education is hurting America