MT Newswires -Shutterstock
Unilever (ULVR.L, UNA.AS) is in advanced talks with US-based spice maker McCormick & Co. for the potential sale of certain elements of its foods business, the consumer goods giant said in response to media speculation on Tuesday.
The potential deal is expected to combine Unilever Foods with McCormick, with Unilever and its shareholders owning 65% of the combined entity. A majority of the consideration is expected to be equity in McCormick, with an upfront cash component of $15.7 billion.
London-based Unilever will exclude parts of its foods portfolio from the deal, such as its business in India. RBC Capital Markets, which is not “overly impressed” by details of Unilever’s potential disposal so far, pegged the value of the company’s complete food business at 40 billion euros.
While cautioning about the uncertainty of signing an agreement, Unilever said a transaction could be finalized on Tuesday. To make the deal tax-free for Unilever and its shareholders under US federal income tax law, the group plans to execute the transaction through a Reverse Morris Trust.
The dual-listed consumer packaged goods company received an inbound offer from McCormick for its foods division, according to a March 20 release. At the time, Unilever said it was “confident in the future of the Foods business as part of Unilever.”
RBC Capital Markets said the proposed structure raises strategic questions about the combined business, which would be owned 65% by Unilever and be “a much less concentrated business” than the current foods unit.
“We are not sure of the justification for introducing partial ownership of a less concentrated business. If that’s right (and we will have to wait for the full announcement – if forthcoming – to be sure) it leaves Unilever with partial ownership of a more complicated business rather than full ownership of one dominated by just two brands. That doesn’t sound terribly appealing to us,” RBC added.
Unilever shares were almost 1% higher in London during midday trading.