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20 July 2017, 12:50 | Maryann Sutton
Durex owner Reckitt Benckiser sells sauces business for $4.2bn
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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