McCormick CEO Brendan Foley Talks Unilever Deal
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The spice giant McCormick is betting on scale, moving to combine with Unilever's food business in a deal aimed at building a global flavor powerhouse. The key question is whether investors will have any appetite for it.
Oh boy.
I know, a lot of puns here, but I'm here for it and for the spices because I love to cook and I spend a lot of my day in the spice aisle. Looking at the spice aisle. at ShopRite. It's been a lot of days at ShopRite. Joining us now is Brendan Foley, chairman and CEO of McCormick. Brendan, great to have you. Really appreciate you coming in. Talk to us first about this deal, because it is a massive deal. And I guess you'll back into a company that still will have a majority of Unilever shareholders, but you'll stay on running the business and keep your headquarters.
That's right. This is a combination really focused on growth and value creation. So you have two iconic brand portfolios combining to really create just a preeminent food company that's all focused on flavor. And so when we look at this, it's going to be very accretive in the first year. Sales, adjust the operating margin, adjust the EPS. And so we really think there's a lot of value creation opportunity here. But It's also an opportunity for McCormick just to continue to kind of that strategic focus on flavor at a global level.
It does feel a little bit counter to the overall trend of what's happening with consumer products. Kraft Heinz paused a split but still is looking at it. Keurig, Dr. Pepper, this is moving in the opposite direction. Are they getting something wrong? Why do you think that you're growing bigger as others are trying to do spinoffs or shrinking and focusing in on various parts of their business?
You know, for both Unilever and McCormick, this is about focus. And, you know, we're really bringing together a number of brands. Again, as we said, they're all focused on flavor. And that's what McCormick's focus is.
What is the significance of McCormick's acquisition of Unilever's food unit?
And we bring the focus of a food company now to that brand portfolio that we're combining with Unilever. But it is really about focus in both companies.
So I want to focus on the flavor too. I have a million questions about your products, but I want to ask first about the deal because the structure is interesting. It's a reverse Morris trust. I don't know what that means, but tell us about the mechanics of that and why you decided to do it this way.
Well, as we combine both companies, you know, think about the size of Unilever. It's about two-thirds the size of the total combined, and McCormick's about one-third, and that's really the combination that we agreed upon in terms of the proportion for both shareholders. But both shareholders win in this. What they get is a larger food company that's faster-growing, with stronger margins, and an ability to really kind of really build out globally.
Well, and Unilever is a monster business, but they must have a lot of faith in you and your management team, because otherwise... they would obviously replace you.
McCormick is the right home for these brands. And when we talked about it, I mean, the equity fit of the focus of their portfolio, which is brands like Hellmann's and Knorr and other brands that are also local favorites, combined with McCormick, it's a really strong fit when you think about the grocery store.
It is a big project to take on. What becomes sort of the pain points of an acquisition of a deal of a reverse Moore's Trust of this size? What needs to be worked through in the coming months and years?
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