losangelesnewstoday.com March 22, 2018

Reckitt Benckiser sells food business to US Schwartz owner for £3.2bn

20 July 2017, 12:50 | Maryann Sutton

Durex owner Reckitt Benckiser sells sauces business for $4.2bn

McCormick cuts the mustard $4.2bn in deal with Reckitt Benckiser to pick up its food business

McCormick & Company will purchase French's Food on a cash-free, debt-free basis and will retain the brand names of French's, Frank's RedHot and Cattlemen's. "RB Foods' focus on creating products with simple, high-quality ingredients makes it a flawless match for McCormick as we continue to capitalize on the growing consumer interest in healthy, flavorful eating".

Reckitt said the proceeds of the deal will be used to reduce its net debt, after its USD17.90 billion purchase of U.S. baby formula maker Mead Johnson in February.

According to McCormick the deal was expected to achieve "meaningful accretion" to margins and adjusted earnings per share, excluding transaction and integration costs.

"McCormick's acquisition of Reckitt's food arm brings the company very close to Kraft Heinz's leadership position in sauces, dressings and condiments in the US, with now just two percentage point difference in share", said Lianne van den Bos, senior food analyst at Euromonitor International.

That deal took Reckitt, whose brands include Durex condoms and Nurofen painkillers, into the baby-food market for the first time - and targeted rapid expansion in fast-growing Asian markets like China. That's almost twice as high as the valuation McCormick was offering Premier and makes it unsurprising Unilever and Hormel chose to walk away. Reckitt Benckiser stock rose 2 percent early Wednesday in London, extending its increase for the year to 16 percent.

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The UK maker of French's mustard, Nurofen and Durex condoms is poised to offload its food division to U.S. consumer good firm McCormick. It made £152m in pre-tax earnings past year.

The consideration of $4.2bn is subject to customary working capital adjustments at completion, with RB planning to use the net proceeds to reduce its debt.

McCormick projects robust growth that the hot sauce category is experiencing would continue.

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

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