Unilever is in advanced negotiations to merge its food business with McCormick & Company in a deal valued at approximately $15.7 billion, granting Unilever shareholders a 65% stake in the combined entity.
Deal Structure and Terms
- The transaction is structured as a Reverse Morris Trust, providing tax benefits.
- Unilever would spin off its food division and merge it with McCormick, owner of Cholula hot sauce.
- The deal excludes Unilever's operations in India.
- Barclays analysts valued Unilever's food business at €28 billion to €31 billion, including debt.
Strategic Context and Leadership Move
- This marks CEO Fernando Fernandez's first major strategic action since taking office in March 2025.
- Fernandez previously completed the spin-off and listing of Unilever's ice cream business, home to Ben & Jerry's and Magnum.
- Unilever's food roots trace back to 1860, with its 1929 formation from Margarine Unie and Lever Brothers.
Market Challenges and Investor Pressure
- Packaged food demand has declined due to consumer shifts toward fresh groceries and the rise of GLP-1 weight loss drugs.
- Stiff competition from cheaper private-label brands has further pressured the sector.
- Activist shareholder Nelson Peltz has long pressured Unilever to streamline its portfolio, contributing to CEO departures.
- Recent divestments include snack brand Graze and plant-based meat brand The Vegetarian Butcher.
Analyst Perspectives and McCormick's Background
- Analysts consider the deal strategically sensible but complex given McCormick's smaller size.
- McCormick has grown via acquisitions, including Frank's and French's for $4.2 billion in 2017 and Cholula hot sauce for $800 million in 2020.