McCormick & Co. and Unilever have entered into an agreement to combine McCormick with Unilever's Foods business excluding India and other excluded businesses. McCormick is committed to remaining a flavor-focused business and will integrate and leverage Unilever Foods' technology capabilities, R&D centers and manufacturing footprint.

Under the terms of the agreement and upon closing of the transaction, Unilever and its shareholders are expected to receive shares equating to 65.0% of the fully diluted combined-company outstanding equity, equivalent to $29.1 billion based on McCormick's one-month volume-weighted average price of $57.84. Unilever will also receive $15.7 billion in cash, subject to certain closing adjustments.

Upon closing of the transaction, Unilever shareholders are expected to own 55.1%, while McCormick shareholders will own 35.0%. Unilever is expected to own 9.9% of the fully diluted combined-company outstanding equity.

The combination brings together two large organizations with complementary global footprints and portfolios of brands across herbs, spices, seasonings, cooking aids, condiments and sauces. The combined company is expected to benefit from expanded global reach, enhanced scale across retail and foodservice channels and greater resources to invest in innovation, brand-building and global distribution.

Brendan Foley, chairman, president and chief executive officer of McCormick, said, "This transformative combination accelerates McCormick's strategy and reinforces our continued focus on flavor. The Unilever Foods business is one we have long admired, with a portfolio that complements our existing business, capabilities and long-term vision. Together, we will be better positioned to accelerate growth in attractive categories. This combination will create a diversified flavor leader with a robust growth profile that remains differentiated by its focus on flavoring calories while others compete for them."

"Unilever Foods' global portfolio of strong brands, combined with our proven expertise in insight-driven brand-building and integration, will enable us to deliver flavor in new and exciting ways for more consumers, driving significant growth across the combined portfolio and value for all stakeholders. Integrating two global organizations of this scale requires disciplined execution, and we are confident that our detailed integration roadmap, experienced teams from McCormick and Unilever, external advisors and our strong partnership will enable us to capture the full value of this opportunity. McCormick is the right partner for Unilever Foods' brands and employees, and our shared culture and values will empower our combination. We are excited to welcome their exceptional talent and international expertise to our Power of People culture."

Fernando Fernández, chief executive officer of Unilever, said, "For Unilever, this transaction is another decisive step in sharpening our portfolio and accelerating our strategy towards high-growth categories as a €39 billion pureplay HPC company with a proven sector-leading growth profile. We are unlocking trapped value through a growth-led separation of Foods, creating a scaled, global flavor powerhouse. By combining Unilever Foods' iconic leading brands and global reach with McCormick's exceptional portfolio, category expertise and capabilities, we are establishing a focused, high-quality business with significant top line growth and value creation potential."

"This is a combination built on strong strategic and cultural alignment, providing exciting opportunities for our people and ensuring our Foods brands continue to thrive as part of a global flavor leader. Our retained ownership stake reflects our conviction in the strength of the combined company and its future prospects."

McCormick's brands are set to benefit from greater access to high-growth regions in EMEA, Latin America and APAC served by Unilever Foods' extensive infrastructure and distribution. Unilever Foods' brands will have an enhanced strategic runway for growth in North America, where McCormick has a stronger profile and capabilities.

The combined company will benefit from a combined foodservice platform with broad global distribution capabilities and customer recognition, supported by McCormick's front-of-house strength and Unilever Foods' chef-led, back-of-house strength. Together, the combined foodservice platform will have approximately $6 billion in fiscal year 2025 combined company sales.

The combined company is expected to target a growth rate of 3 to 5% in year three, supported by increased investment and volume-driven revenue opportunities. The portfolio of the combined company will be focused on categories benefiting from growing consumer trends, including increased demand for flavors both at home and away from home, and complementary to the rising demand for protein and produce.

The combined company expects to realize approximately $600 million in run-rate annual cost synergies, net of growth reinvestments. These cost synergies are projected to be captured over a three-year period, with approximately two-thirds of the synergies realized by the end of year two, driven by procurement, manufacturing and SG&A. One-time expenditures to achieve these synergies are estimated to be approximately $300 million. Approximately $100 million incremental cost and revenue synergies will be reinvested to further drive growth.

Including estimated run-rate synergies, the expected operating income margin for the combined company for the third year post-closing is expected to be approximately 23 to 25%.

Upon closing of the transaction, Foley is expected to remain chairman, president and chief executive officer of McCormick, and Marcos Gabriel is expected to remain executive vice president and chief financial officer. Executives from both companies will serve in key leadership roles. Upon closing, Unilever will appoint four of twelve members of the combined company board of directors. In addition, one Unilever executive is expected to serve as one of the four directors appointed for two years to support the integration.

McCormick will maintain its global headquarters in Hunt Valley, Md., and have an international headquarters in the Netherlands. Unilever Foods has a long-standing presence in the Netherlands, which is home to its R&D capability that supports its sector expertise. Management views this capability as a core strength of the combined company and intends to maintain a substantial presence in the Netherlands. The combined company is planning to have a secondary stock listing in Europe to reflect the global nature of Unilever's current shareholder base.

The separation of Unilever's Foods business from the Unilever Group is expected to be structured as a Reverse Morris Trust transaction that is not expected to give rise to US federal income tax for Unilever or its shareholders. The agreement has been unanimously approved by both the McCormick and Unilever Boards of Directors.

McCormick has received $15.7 billion in committed bridge financing from Citigroup Global Markets Inc., Goldman Sachs Bank USA and Morgan Stanley Senior Funding, Inc., and intends to fund the cash component of the purchase price through a combination of cash from its balance sheet and proceeds from new debt issuance.

The transaction is expected to close by mid 2027, subject to McCormick shareholders' approval, receipt of required regulatory approvals and the satisfaction of other customary closing conditions. Works council consultation will be conducted prior to the closing of the transaction.

Advisors

Citi and Rothschild & Co are acting as financial advisors to McCormick, and Cleary Gottlieb Steen & Hamilton LLP and Hogan Lovells are acting as legal advisors.

Goldman Sachs International and Morgan Stanley & Co. International plc are acting as financial advisors and corporate brokers to Unilever. Clifford Chance LLP and Wachtell Lipton Rosen & Katz are acting as legal advisors to Unilever.

Source: McCormick & Co. Inc.