Reckitt sells food division for $4.2bn
- Author: Wendy Palmer Jul 20, 2017,
Jul 20, 2017, 0:53
LONDON, July 19 (Reuters) - British shares edged up on Wednesday, helped by a buoyant consumer goods sector after Reckitt Benckiser sold its food business to a US company, while disappointing earnings reports sent mid-caps lower.
The deal will mean McCormick adds a slew of brands to its roster including French's mustard and Frank's Red Hot Sauces.
"RB Foods' focus on creating products with simple, high-quality ingredients makes it a ideal match for McCormick as we continue to capitalize on the growing consumer interest in healthy, flavourful eating", said Lawrence E. Kurzius, McCormick's CEO.
Reckitt Benckiser chief executive Rakesh Kapoor said: "French's Food is well positioned to continue on its successful growth trajectory under the food-focused ownership of McCormick". The company also expects revenue synergies as a result of leveraging seasonal holiday promotions and grilling events that include other McCormick brands including Lawry's®, Grill Mates® and its global branded spices, herbs and extracts. While Reckitt Beckinser's share price was up 1.6 percent at 79.34 pence in late trading in London, McCormick's share price was 5.4 percent lower to $91.90 in late morning trading in NY.
At $4.2 billion, the price represents a multiple of more than 7 times the annual sales from the business and 20 times its earnings before interest, tax, depreciation and amortization. Last year, grocery chain Loblaw set off a firestorm when it yanked French's ketchup from the shelves, a move that favoured USA -made Heinz.
According to MarketWatch, McCormick previously tried to purchase the UK's Premier Foods, known for Mr. Kipling cakes and Oxo stock cubes.
Reckitt said the deal was on a cash free, debt-free basis, and it would use the proceeds from the sale to reduce its debt.
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.