McCormick & Co. (NYSE:MKC) said Wednesday it will buy Reckitt Benckiser's food business for $4.2 billion, adding well-known brands such as French’s mustard and Frank’s RedHot to its portfolio of spices and herbs.
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Sparks, Maryland-based McCormick fought off rival bidders to secure the deal, which will create a combined group with annual sales of around $5 billion. The deal will catapult McCormick, the 10th-largest condiments maker in the U.S., to a leading position in the category. French's and Frank RedHot brands will become McCormick's second- and third-most popular brands, respectively.
In addition to its stable of namesake condiments, McCormick owns Old Bay seafood seasoning, Stubb’s barbeque sauce and Zatarain’s New Orleans-style foods. U.K.-based Reckitt Benckiser is also known for Cattlemen’s barbeque sauce.
"RB Foods' focus on creating products with simple, high-quality ingredients makes it a perfect match for McCormick as we continue to capitalize on the growing consumer interest in healthy, flavorful eating," said Lawrence E. Kurzius, McCormick's CEO.
The deal is part of RB's strategy to re-focus on consumer health and hygiene products after it bought U.S. baby formula maker Mead Johnson. The company's non-food brands include Nurofen, Woolite and Clearasil.
"This transaction marks another step towards transforming RB into a global leader in consumer health and hygiene," said Rakesh Kapoor, CEO of RB.
Reckitt's food business is headquartered in Chester, New Jersey. The company employs 450, including some 360 in Springfield, Missouri.
McCormick has said it wants to strip out around $50 million in cost synergies after the takeover, the majority of which would be achieved by 2020. The company said it will fold RB Foods into its consumer and industrial segments.
Shore Capital analyst Darren Shirley says Reckitt "is achieving a very attractive valuation for a North American food business, in our view."
Shares of McCormick fell 4.5% to $92.75 in pre-market trading. Reckitt Benckiser shares in London rose 1.5%.
The Associated Press contributed to this report.