Reckitt to sell French's Food to McCormick for £3.2M

Posted July 20, 2017

Industry insiders said Reckitt Benckiser wanted to sell its food business to help pay for its $16.6 billion acquisition of infant formula maker Mead Johnson.

Following the deal, Reckitt can now shift its entire focus towards its health and hygiene wing that has products like Dettol, Scholl, Durex, and Mortein among many others, as well as the latest feather in its hat - Mead Johnson Nutrition Company, which it acquired for a whopping United States dollars 17.9 billion earlier this year.

Reckitt's acquisition of Mead Johnson, announced in February, was an "inflection point" for the company, Chief Executive Officer Rakesh Kapoor has said. The deal will strengthen McCormick's footprint in the fast-growing condiment sector through the addition of Frank's RedHot® Hot Sauce, French's® Mustard and Cattleman's® branded products.The deal, expected to close third of fourth quarter 2017, also includes the acquisition of the nutrition bar brand Tiger's Milk.

"... I would say that over the last decade, whenever we've looked at big ideas, ... the opportunity to acquire RB Foods was really very near or either at or very near the top of the list", he said. Reckitt's shares are now changing hands 1.42 percent higher at 7,923.00p. French's Food is well positioned to continue on its successful growth trajectory under the food-focused ownership of McCormick. The deal, disclosed July 18, will create a combined group with annual sales of around US$5 billion. With 411 million pounds ($536 million) in sales previous year, French's Foods accounted for 4 percent of Reckitt's total revenue.

Reckitt's shares were up 1.4 per cent to £79.21 this afternoon.

It went after another United Kingdom business in 2016, when McCormick considering buying Premier Foods Plc. We think the strategic rationale of the tie-up, the possibility of which we'd written about in April, is clear: It affords McCormick the opportunity to leverage its leading presence in the spices, seasoning, and food flavoring aisle with high-growth, high-margin condiment brands, complementing its 2015 purchase of USA barbecue sauce maker Stubb's.

The deal is subject to customary purchase price adjustments, and regulatory approval Reckitt said.

Reckitt said the deal was on a cash free, debt-free basis, and it would use the proceeds from the sale to reduce debt.