McCormick has signed a definitive agreement to acquire Reckitt Benckiser’s Food Division (RB Foods) from Reckitt Benckiser Group for $4.2 billion, subject to certain customary purchase price adjustments. The acquisition, which includes well-known brands such as Frank’s RedHot Hot Sauce and French’s Mustard, strengthens McCormick’s leadership in the condiments category and advances the company’s vision to “Bring the Joy of Flavor to Life.”
McCormick will integrate RB Foods into its Consumer and Industrial divisions and will retain the brand names of French’s, Frank’s RedHot, and Cattlemen’s. The combined pro forma 2017 annual net sales are expected to be approximately $5 billion with significant margin accretion.
“The acquisition of RB Foods strengthens McCormick’s flavor leadership with the addition of the iconic French’s and Frank’s RedHot brands to our portfolio, which will become our number two and number three brands, respectively,” said Lawrence E. Kurzius, chairman, president, and CEO, McCormick. “RB Foods’ track record of creating market-leading products and its dedicated state-of-the-art manufacturing facility are a strong complementary fit that we expect will strengthen McCormick’s business opportunities as we expand our presence in condiments, a core category for the company in the United States and internationally.”
McCormick expects to leverage its international infrastructure, which already includes condiment consumer insight, sales, and supply chain expertise, to significantly expand the global presence of Frank’s RedHot and French’s, which we expect will result in substantial growth and increased household penetration. In addition, McCormick expects revenue synergies as a result of leveraging seasonal holiday promotions and grilling events that include other McCormick iconic products like Lawry’s, Grill Mates, and its other global branded spices, herbs, and extracts.
The transaction is expected to be completed in the third or fourth quarter of McCormick’s fiscal 2017.
“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 United States, with now just two percentage points difference in share,” said Lianne van den Bos, senior food analyst at Euromonitor International, in response to the acquisition news. “The strong synergies between the brands offer plenty of opportunities for McCormick to bring operating costs down and increase profitability, a key focus area for many multinationals this year especially within staple foods … That said, a $4.2 billion price tag seems a hefty premium to pay for Reckitt’s food arm that generated $338 million in sauces, dressings, and condiments in 2016.”