Updated 11:59 a.m. ET on March 31
LONDON — Unilever has confirmed the $20 billion merger of its foods business with U.S. spices and flavors maker McCormick & Co. and simultaneously taken a giant step toward its goal of becoming a beauty- and wellness-focused powerhouse.
Unilever said the McCormick merger will “create a scaled, global flavor powerhouse, bringing together two industry-leading, culturally aligned foods businesses with strong momentum, superior top-line growth and enhanced value creation.”
The combined business will be led by the McCormick chief executive and chief financial officers, with senior management representation from Unilever Foods. It will house brands including McCormick, Knorr and Hellmann’s, and “high growth potential” names such as Cholula, Maille and Frank’s, as part of a global portfolio with combined revenues of $20 billion.
McCormick will retain its existing name; its Hunt Valley, Md., global headquarters and New York Stock Exchange listing. McCormick will also establish international headquarters in the Netherlands, where Unilever has a base. The company is also planning a secondary listing in Europe.
Investors in both firms were unimpressed. Unilever’s share price was down 7 percent at 42.18 pounds in late afternoon trading, while shares in McCormick & Co. sank 6 percent to $50.75 after the deal was announced on Tuesday.
Unilever said that, going forward, it will become a “leading pure play” home and personal care company, with 39 billion euros in revenues and a “sector-leading” growth profile.
The company said that after the deal completes in 2027, it will operate across beauty, well-being, personal care and home care, “with leading positions in attractive categories, fast-growing geographies and channels through a portfolio of high-performing, innovative brands.”
Unilever, which owns brands including Dove, Vaseline, Paula’s Choice, Liquid I.V. and Hourglass cosmetics, said the deal marks another decisive step to reshape itself “into a simpler, sharper, higher growth company, built upon synergistic capabilities across science-led innovation, demand creation and operational execution.”
Dove’s Confetti Cake product range.
The company said it has delivered “superior performance” versus the overall home and personal care sector over the last three years. The sharper focus on fewer, high-growth categories “will further strengthen the value creation model for shareholders,” the company said.
Fernando Fernandez, CEO of Unilever, described the transaction as “another decisive step in sharpening our portfolio and accelerating our strategy toward high-growth categories as a pure play HPC company with a proven sector-leading growth profile.”
He added: “This is a combination built on strong strategic and cultural alignment, providing exciting opportunities for our people and ensuring our foods brands continue to thrive as part of a global flavor leader. Our retained ownership stake reflects our conviction in the strength of the combined company and its future prospects.”
As part of Tuesday’s transaction, Unilever and its shareholders will receive a proportionate mix of McCormick’s existing voting and non-voting common stock, equating to 65 percent of the fully diluted combined company equity, equivalent to $29.1 billion.
The figure is based on the last one-month, volume-weighted average McCormick share price of $57.84.
Unilever will also receive $15.7 billion in cash, subject to certain closing adjustments, that will offset one-off separation and tax costs; pay down debt to its current level of around two times net debt to EBITDA following closing, and support 6 billion euros of share buy-backs expected to run between 2026 and 2029.
The transaction reflects an enterprise value of $44.8 billion for Unilever Foods, in line with the most attractive foods company valuations.
The transaction is being undertaken by a Reverse Morris Trust, which is intended to be tax-free for U.S. federal income tax to Unilever and its shareholders. Full terms will be revealed if a transaction is agreed.
Earlier this month, the consumer giant, parent of brands ranging from Dove and Vaseline to Hellmann’s, Marmite and Knorr, confirmed it was talking to McCormick, owner of brands including Old Bay, French’s and Schwartz, about a deal.
Ilona Maher for Paula’s Choice.
Courtesy of Paula’s Choice
Last year, Unilever made no secret of its wider strategy to focus on the high-growth beauty and wellness businesses.
During Unilever’s first-half results presentation last July, Fernandez laid out the group’s priorities: “More beauty and well-being and personal care; disproportionate investment in the U.S. and India, and a sharper focus on premium segments and digital commerce.”
He added: “We are building a marketing and sales machine that drives desire at scale in our power brands and ensures execution excellence across all channels, to deliver consistent volume growth and gross margin expansion.”
Last September, Fernandez told the Barclays Global Consumer Staples Conference he expects two-thirds of sales to come from beauty and personal care in the medium term. Beauty and personal care currently account for around 51 percent of sales.
