Unilever and McCormick to create a new giant in the $60 billion food market

British conglomerate Unilever is in the final stages of talks to merge its grocery division with US spice maker McCormick. It owns brands such as French's mustard, Old Bay seasoning and Cholula hot sauce. The potential deal would bring Unilever $15.7 billion in cash and give its shareholders majority control in the combined company, Reuters notes.

Unilever, whose food portfolio includes brands such as Hellmann's mayonnaise and Knorr soup mixes, confirmed Tuesday that it is in talks with McCormick. The deal, which involves about $16 billion in cash and stock, could be announced as early as March 31, the day McCormick is scheduled to report its latest quarterly results, The Wall Street Journal (WSJ) reported. That said, WSJ sources warn that plans could still change.

If the deal goes through, it will be structured as a Reverse Morris Trust, which offers significant tax benefits, the paper's interlocutors said. Unilever would spin off the food division into a separate company, which would then merge with McCormick. Unilever shareholders will retain a 65% stake in the combined firm, Reuters points out.

Barclays analysts value Unilever's food division at between €28 billion and €31 billion ($32.1 billion to $35.5 billion), including debt. Given McCormick's market capitalization of $14.2 billion and a cash payment of $15.7 billion as a result of the deal, the value of the new combined structure could exceed $60 billion, Reuters adds. The same assessment of the combined company is given by WSJ.

Unilever shares are up 0.7% in London trading on March 31, while they are up 1.1% in the U.S. premarket on March 31. Unilever has a market value of more than $130 billion. McCormick shares are up 3.6% at Tuesday's premarket in New York. McCormick has a market value of just over $14 billion.

The deal between Unilever and McCormick will be Fernando Fernandez's biggest move since he took over as head of Unilever in March 2025. As a result of the merger of Unilever's grocery division with McCormick, the UK-based Unilever itself will be able to focus on beauty, personal care and household products, the WSJ writes.

The company had previously spun off its multi-billion dollar ice cream division (Ben & Jerry's and Magnum brands) into an independent business, completely separating it from its parent structure, Reuters notes.

Although Unilever's food sector is a high-margin business, its sales growth lagged behind its cosmetics and personal care divisions. This has hampered the company's ambitions to achieve overall group revenue growth of 4-6%, Reuters explains.

As for McCormick, the spices and sauces maker is scaling the business by integrating Unilever's global assets.

The deal with McCormick will be an addition to the current cost-cutting program launched by Unilever in 2024, the program is designed to save about €800 million over the next three years, Reuters notes. Unilever, the agency recalls, has been under pressure from investors to get rid of food brands for several years. The pressure intensified in 2022 when activist investor Nelson Peltz bought a stake in Unilever. Peltz is linked to the departure of two Unilever CEOs, Alan Joep and Hein Schumacher, who investors believe were not quick enough to optimize the company's portfolio of assets.

This article was AI-translated and verified by a human editor