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McCormick to acquire Reckitt Benckiser's food business for $4.2 billion

McCormick to acquire Reckitt Benckiser's food business for $4.2 billion

McCormick will integrate RB Foods into its Consumer and Industrial segments and will keep the brand names of the three businesses. McCormick plans to fund the deal with a combination of equity and debt, and said it has obtained committed bridge financing.

With the acquisition of Reckitt Benckiser's food division, McCormick is adding a roster of brands to its spice and seasoning mix portfolio that further strengthens the company's position as a go-to destination for adding flavor to a variety of dishes.

U.S. based McCormick & Co is paying $4.2bn for the business, which includes French's mustard. It will also enable it to focus more closely on its consumer health and home brands, which include Durex condoms and Mucinex cold medicine.

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

The deal represents a success for the firm after a failed bid to buy Premier Foods past year.

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According to commentators, for Reckitt Benckiser unloading the products came as part of an overhaul that got underway with an expansion into baby formula through its acquisition of Mead Johnson Nutrition Co for $16.6 billion.

"... I would say that over the last decade, whenever we've looked at big ideas, ... the opportunity to acquire RB Foods was really very near or either at or very near the top of the list", he said. While Reckitt Beckinser's share price was up 1.6 percent at 79.34 pence in late trading in London, McCormick's share price was 5.4 percent lower to $91.90 in late morning trading in NY.

A year ago it approached Premier Foods PFD.L , the owner of British food brands including Mr Kipling cakes and Oxo stock cubes, but was rebuffed.

Credit Suisse Group is serving as the financial adviser to McCormick on the RB Foods transaction, and Cleary Gottlieb Steen & Hamilton is legal counsel.

The deal is expected to provide a sizeable boost to the company's sales, with a projected increase from $4.4 billion in its fiscal year 2016 to around $5 billion.

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