Unilever and its shareholders will have a 65 per cent stake in the combined company, with Unilever also receiving USD 15.7 billion in cash
Spice maker McCormick and fast-moving consumer goods major Unilever have entered into an agreement to combine McCormick with Unilever’s foods business excluding India and other excluded businesses. The transaction reflects an enterprise value of USD 44.8 billion for Unilever Foods.
Under the terms of the agreement and upon closing of the transaction, Unilever and its shareholders are expected to receive shares equating to 65 per cent of the fully diluted combined-company outstanding equity, equivalent to USD 29.1 billion. Unilever will also receive USD 15.7 billion in cash. The deal is aimed at creating a company worth around USD 65 billion.
The combined business will house leading, iconic brands including McCormick, Knorr and Hellmann’s and high growth potential brands including Cholula, Maille and Frank’s. The separation of Unilever Foods will position Unilever as a leading pureplay HPC company, as it will operate across beauty, wellbeing, personal care and home care post-completion.
Combining McCormick and Unilever Foods
The combined company will be led by the McCormick Chief Executive Officer (CEO) and Chief Financial Officer (CFO), with senior management representation from Unilever Foods. McCormick will retain its existing name, its Hunt Valley, Maryland global headquarters and NYSE listing. It will establish international headquarters in the Netherlands and is planning a secondary listing in Europe.
The combination of Unilever’s Foods business with McCormick will create a global flavour powerhouse anchored in a portfolio of iconic brands across herbs, spices, seasonings, cooking aids, sauces and condiments.
“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,” stated Fernando Fernandez, Chief Executive Officer, Unilever.
Transaction Details
Unilever shareholders will own 55.1 per cent of the fully diluted combined company equity and Unilever will own a 9.9 per cent stake. The combined company expects to realise approximately USD 600 million of annual run rate cost synergies net of growth reinvestments, with full value expected to be achieved by the end of third year. Incremental cost and revenue synergies of USD 100 million will be reinvested to further drive growth.
“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 flavour leader with a robust growth profile that remains differentiated by its focus on flavouring calories while others compete for them,” stated Brendan Foley, Chief Executive Officer, McCormick.
With completion expected by mid-2027, the Transaction is expected to be structured as a tax-efficient “Reverse Morris Trust” transaction and is intended to be tax-free for US federal income tax purposes to Unilever and its shareholders, thereby mitigating some of the overall transaction-related tax costs.
Upon closing of the transaction, the combined company’s net leverage is expected to be 4.0x or less. Under the merger sgreement, McCormick must pay Unilever a termination fee equal to USD 420 million if Unilever terminates the agreement because the McCormick board changes its recommendation in favour of the transaction or in certain circumstances where the merger agreement is terminated and McCormick enters into a competing transaction.
Value Creation
The board of Unilever believes that the deal will unlock value, enhance the group’s structural growth profile and simplify the portfolio enabling greater speed of execution, repeatability at global level and enhanced returns on investment.
The growth led separation of Foods at an enterprise value/sales of 3.6x and an enterprise value/Ebitda of 13.8x unlocks value in line with Unilever’s overall valuation and with the most attractive foods company valuations. The upfront cash proceeds of USD 15.7 billion to be received by Unilever will offset one-off separation and tax costs, pay down debt to its current level of 2x leverage and support 6 billion euro of share buy-backs expected to run between 2026 and 2029.
Following separation, and based on FY25 revenues, Unilever is expected to have an enhanced category footprint, with beauty, wellbeing and personal care contributing 67 per cent of group turnover (versus 51 per cent in FY25) and with 90 per cent of group revenues in one or two positions at a category/geography cell level. These categories share structural tailwinds driven by premiumisation, science-led innovation and exposure to faster-growing channels, the company said.
A superior footprint in faster-growing markets, with anchor markets of the United States and India contributing 38 per cent of group turnover (versus 33 per cent in FY25) and emerging markets contributing 62 per cent of group turnover (versus 59 per cent in FY25).
The company pointed out that it reaffirms its commitment to and confidence in delivering on its medium-term value creation algorithm, with mid-single digit underlying sales growth, underpinned by at least 2 per cent underlying volume growth and continued modest improvement in operating margin.
