Schwartz owner spices up company with Reckitt deal

Schwartz owner spices up company with Reckitt deal

The deal is part of RB's strategy to re-focus on consumer health and hygiene products after it bought USA baby formula maker Mead Johnson.

British consumer health giant Reckitt Benckiser Group PLC has agreed to offload its sauces division to USA spicemaker McCormick & Co Inc for US$4.2 billion, the groups said yesterday.

"French's Food is well positioned to continue on its successful growth trajectory under the food-focused ownership of McCormick", said Chief Executive Officer Rakesh Kapoor. It said it would integrate the business, RB Foods, into its consumer and industrial segments, and retain the top brand names like French's, Frank's RedHot and Cattlemen's.

Slough-based Reckitt Benckiser has completed its $4.2bn (£3.2bn) sale of its food business to the U.S. owner of the Schwartz herbs and spices brand.

The transaction price equates to 20 times the division's earnings before interest, tax, depreciation and amortization, "which feels to us like a very high price for a USA -oriented ambient food business", James Edwardes Jones, an analyst at RBC Capital Markets, wrote in a note. Money gained from selling French's would go to reducing its debt following the Mead Johnson acquisition, it said. Needless to say, Reckitt Benckiser's investors were happy with their side of the deal based on the London-listed stock's more than 1.5 percent gain on Wednesday.

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The deal is to create a combined group with annual sales of about US$5 billion.

McCormick projects robust growth that the hot sauce category is experiencing would continue.

Equipment rental company Ashtead (LON:AHT) shares are up 1.2% as the company announced that the acquisition Canadian CRS Contractors Rental Supply for up to CAD295mn through its North American Sunbelt Rentals business.

Subject to regulatory approvals, the deal is expected to complete during the third quarter of 2017. 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. McCormick and Premier Foods couldn't agree on a sale price at the time.

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