Spices and seasonings maker McCormick has agreed to acquire Reckitt Benckiser’s food business for $4.2 billion on a debt-free, cash-free basis. The unit, which includes brands such as French’s, Frank’s RedHot and Cattlemen’s, generated revenue of $564 million in 2016 and $206 million in EBITDA. RB will use the proceeds from the deal to pay down debt following its monster $17.9 billion takeover of infant-formula maker Mead Johnson Nutrition earlier this year.
The move comes as deep-pocketed acquirers in the sector tackle fewer, but bigger deals. Completed M&A transactions in the food products sector stand at just 168 so far this year, per the PitchBook Platform, compared with more than 500 during the whole of 2016. Although the numbers are down, value is soaring—those 168 deals have been worth over €22.7 billion. By contrast, the whole of 2016 accounted for €18 billion in total deal value.
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Completed M&A in the food products sector
A wave of consolidation is driving the trend for super-sized M&A in the food products sector. For one, Reckitt isn’t the only multinational which has been looking to divest non-core operations. Anglo-Dutch consumer goods giant Unilever announced in April that it would sell its spreads business, which could fetch £6 billion in an effort to restructure the company in the wake of the failed $143 billion Kraft Heinz bid. Tyson Food’s $4.2 billion takeover of AdvancePierre Foods, completed in June, is also indicative of an industry coalescing amid a strategic re-drawing of the map. Indeed, Reckitt ’s aforementioned MJN deal—the largest so far this year—comes as part of its refocus on consumer health and hygiene products.
Article by Sean Lightbown, PitchBook