Marmite maker Unilever creates food empire in $45bn merger
Unilever has sealed a $45bn merger of its food brands with US spice and seasoning giant McCormick, forging a $60bn food empire in which the London-based firm holds a majority stake.
Unilever and its shareholders will own 65 per cent in the new body, with the firm receiving $15.7bn (£11.6bn) in cash and the equivalent of $29.1bn (£21.9bn) McCormick shares.
The merger marks the culmination of a telegraphed push from Unilever to shift away from its food brands, as new chief executive Fernando Fernandez bids to make his consumer juggernaut a “sharper and faster” company.
The deal values Unilever Foods at $44.8bn and McCormick at $21bn, valuing the combined entity at over $65bn (£49bn).
Before the merger was confirmed, analysts had speculated that a straightforward sale would be unlikely because the financial profile of Unilever’s food arm dwarfs that of McCormick.
London-listed Unilever’s share price fell by more than five per cent following the merger announcement, leaving the stock down more than 11 per cent in the year so far at 4,289p.
McCormick’s share price dropped by nearly five per cent to $51 on Tuesday.
The US firm will retain its name and its New York listing, and the new entity will pursue a secondary listing in Europe, its chief executive said.
Activist investor pushes for streamlining agenda
Unilever’s food brands include mayonnaise maker Hellman’s, Marmite and Bovril.
Fernandez said of the deal: “For Unilever, this transaction is another decisive step in sharpening our portfolio and accelerating our strategy towards high-growth categories.”
The company set out plans in 2024 to save €800m over three years and shed 7,500 jobs – including 200 managers, and the new chief executive has said he is aiming to root out “mediocrity” in the firm.
Activist investor Nelson Peltz has been pushing for Unilever to streamline its offering since taking a stake in 2022. Peltz, the founder of Trian Partners, has held a non-executive role on the FTSE 100 firm’s board since building out his stake four years ago.
“Having slimmed down, Unilever will want to show it is fighting fit for the future and it will get its next opportunity to do so with next month’s first-quarter update,” Russ Mold, AJ Bell investment director, said.
Chris Beckett, consumer staples analyst at Quilter Cheviot, said: “The deal will be transformational for McCormick, giving it globally recognised brands and scale for it to compete. It is likely to show the business a lot more love than it got from Unilever.”
Brendan Foley, McCormick’s chief executive officer, said: “This combination will create a diversified flavor leader with a robust growth profile that remains differentiated by its focus on flavoring calories while others compete for them.”
Unilever freezes hiring
Earlier on Tuesday it emerged that Unilver had placed an immediate freeze on hiring as it braced for costs from the Iran war.
The business, which had already cut back on hiring as part of a far-reaching cost-cutting agenda, told staff the ban on hiring will affect “all levels” of recruitment and was taken in response to the “significant challenges” posed by the crisis in the Middle East.
The significant transit delays in the Middle East are making shipping more expensive, and the manufacture of plastic packaging is becoming more expensive.
Fabian Garcia, the head of Unilever’s personal care business, wrote in a memo first reported by Reuters: “Macro economic and geopolitical realities, especially in the Middle East conflict […] bring some significant challenges for the coming few months.
“With this in mind, the Unilever Leadership Executive team has agreed a global recruitment freeze at all levels. This will be effective immediately and last for a minimum of three months.”
The firm said it has taken the steps due to an “uncertain” external environment and will adjust its plans “as necessary”.
The deal is expected to be completed by the middle of next year.