Nurofen and Durex maker sells off food business in £3.2bn deal

Baltimore-based spicemaker McCormick's top US brands include McCormick Grill Mates and Mc Cormick Gourmet

Baltimore-based spicemaker McCormick's top US brands include McCormick Grill Mates and Mc Cormick Gourmet

"Reckitt Benckiser Group plc is pleased to announce that it has entered into an agreement to sell its food business, including the French's, Frank's RedHot and Cattlemen's brands, to McCormick & Company Inc.", Reckitt said in a statement after a strategic review. 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. That's almost twice as high as the valuation McCormick was offering Premier and makes it unsurprising Unilever and Hormel chose to walk away.

The purchase will make McCormick one of the largest USA condiment makers, adding the iconic French's mustard and Frank's RedHot brands to a portfolio comprised of its line of spices, seasoning mixes and condiments.

For Reckitt Benckiser, unloading the products continues an overhaul that began with an expansion into baby formula through the British company's acquisition of Mead Johnson Nutrition Co. for $16.6 billion. The Dutch paint maker, which owns Dulux, said that Ton Büchner had left for health reasons and had been replaced by...

While this is above the 14-19 times EBITDA we anticipated RB's food fare would fetch, we recognize that the assets' high 20s operating margins far exceed the mid- to high teens levels that characterize the packaged food landscape (and McCormick), which we think supports an above-average valuation. In the aftermath of the failed Kraft talks, Unilever was cited by analysts as a possible bidder for the Reckitt business.

United Kingdom shares were marginally higher on Wednesday as the pound weakened against most of its rivals and consumer stocks advanced, helping offset weakness in the mining sector.

Software firm Micro Focus rose 1.9 percent as tech stocks across Europe had their best day in 10 months.

McCormick shares on Tuesday dropped 0.1 percent in NY before the announcement and have gained about 4 percent this year.

The companies expect the deal to close in the autumn, subject to regulatory approvals.

RB Foods is forecast to generate $581 million in revenue during 2017 with an adjusted EBITDA of $215 million, according to McCormick.

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