Marmite maker Unilever agrees $44.8bn deal to combine food arm with McCormick | Unilever

Unilever has agreed to merge its food business with US-based McCormick in a $44.8 billion deal that will give the Marmite-to-Hellmann’s mayonnaise owner majority control of a food empire.

The Anglo-Dutch company will control 65% of the new spinoff, which will combine brands such as Knorr and Pot Noodle with McCormick’s condiments and seasonings such as French mustard, Old Bay relish and Cholula hot sauce.

However, the combined company will be called McCormick and will be led by executives representing senior executives from Unilever’s food business.

Under the deal, McCormick will pay London-listed Unilever $15.7 billion in cash and $29.1 billion in shares equivalent to a stake in almost the entirety of the Anglo-Dutch company’s food arm.

After the merger, which is expected to result in $600 million (£453 million) Having achieved annual cost savings by the end of the third year, McCormick will maintain its global headquarters in the US and be listed on the New York Stock Exchange, and its international headquarters will be at the existing Unilever Foods base in the Netherlands.

Unilever’s food business employs research, development and marketing staff in the UK and has factories producing Pot Noodle in Crumlin, Wales, and Hellman’s, Marmite and Colman’s mustard in Burton-on-Trent.

The companies said the savings would come from changes in production, distribution and material supply, but they had not yet confirmed how many jobs might be affected and where. “This is primarily about accelerating growth,” said Unilever CEO Fernando Fernández.

Brendan Foley, McCormick’s chief executive, said the company “has a strong track record of retaining talent across transactions” and wants the “talented Unilever team” to be part of running the business.

The rest of Unilever, which last year spun off its ice cream division — home to Ben & Jerry’s, Magnum and Wall’s — will focus on beauty, personal care and household products.

“Through growth-oriented disaggregation of food, we are unlocking trapped value by creating a scaled, global taste hub,” said Fernández. “Our retained ownership interest reflects our belief in the strength and future prospects of the combined company.”

Analysts at Jefferies said the deal risked reducing global economies of scale as Unilever has historically argued that the combination of food, health and beauty is “critical for efficiency”. The deal could prompt the company to seek new acquisitions in the health and beauty space, Jefferies said in a note.

The new company is planning a secondary stock listing in Europe, which would “reflect the global nature of Unilever’s existing shareholder base”.

Unilever said its operations in India and parts of its food business, including its Horlicks and Boost brands, will not be included in the new combined company, which has total annual revenues of about $20 billion.

“Integrating two global organizations of this scale requires disciplined execution,” Foley said. “We are confident that our detailed integration roadmap, McCormick and Unilever’s experienced teams, external consultants and strong partnership will enable us to capture the full value of this opportunity.”

The cash and stock deal is executed through a channel Reversing the Morris Trust. This means that US federal income tax for Unilever and its shareholders will be tax-free.

Following the announcement of the deal, Unilever’s shares lost almost 7% of their value, while McCormick in the USA lost 5.6% of its value. Unilever, which is worth around £100 billion, has imposed a three-month global hiring freeze amid the widening conflict in the Middle East.

The deal marks the end of Unilever’s almost century-long focus on selling food products, but means the maker of Dove soap and Tresemmé shampoo is now repositioned to compete directly with major home and personal care companies such as L’Oréal, Beiersdorf and Estée Lauder.

“For Unilever, this transaction is another decisive step in sharpening our portfolio and accelerating our strategy for high-growth categories,” Fernández said.

In 2017, the company released Flora and I Can’t Believe It’s Not Butter! It sold its spreads business, which included brands such as. Most of its tea businesses, including Lipton, PG Tips and Tazo, were sold in 2022, ahead of the listing of its ice cream business last year.

Unilever also divested brands such as The Vegetarian Butcher and healthy snack brand Graze.