Unilever has entered into an agreement to combine its Food business with McCormick & Company, forming a global portfolio with estimated revenues of $20 billion.
By separating Unilever Foods, Unilever plans to become a leading pureplay home and personal care (HPC) company – citing competitive strengths, market making abilities, and €39 billion in revenues based on the fiscal year 2025.
Once the deal is complete, Unilever will operate across the beauty, wellbeing, personal care and home care sectors, while the the combined, ‘culturally-aligned’ foods business will integrate household food brands like McCormick, Knorr, and Hellmann’s. Each business is expected to be ‘better aligned’ to its category, capability, and value creation model.
“Having carefully evaluated the potential strategic options for its Foods business, the Unilever Board believes the Transaction is in the best interests of Unilever’s shareholders,” reads Unilever’s press release. “It 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 combined company will be led by McCormick’s CEO and CFO, with senior management representation from Unilever Foods. McCormick will retain its existing name, its global headquarters in Hunt Valley, Maryland, USA, and its NYSE listing; it will also establish international headquarters in the Netherlands, with a secondary listing planned for Europe.
As per the terms of the agreement, Unilever is expected to combine its foods business with McCormick in a ‘Reverse Morris Trust’ transaction, which is intended to be tax-free to Unilever and its shareholders for U.S. federal income tax purposes.
Unilever and its shareholders will receive a proportionate mix of McCormick’s existing voting and non-voting common stock, equating to 65.0% of the fully diluted combined company equity ($29.1 billion, based on the last one-month volume-weighted average McCormick share price of $57.84).
Unilever shareholders will own 55.1% of the fully diluted combined company equity, and Unilever itself will own a 9.9% stake; not earlier than one year after closing, it is set to sell down its stake ‘in an orderly and considered manner’. McCormick shareholders will own 35.0% of the fully diluted combined company equity.
Furthermore, Unilever will receive $15.7 billion in cash, subject to certain closing adjustments. This is expected to offset one-off separation and tax costs; pay down debt to its current level of c.2.0x net debt to EBITDA following closing; and support €6 billion of share buy-backs expected to run between 2026 and 2029.
The Transaction reflects an enterprise value of $44.8 billion for Unilever Foods, equivalent to an EV/Sales ratio of 3.6x and a 13.8x EV/EBITDA multiple based on McCormick’s $57.84 share price. This aligns with the current trading multiple for Unilever and the ‘most attractive’ foods company valuations.
The combined company expects to realise approximately $600 million of annual run rate cost synergies net of growth reinvestments. Full value is expected to be achieved by the end of year three. Incremental cost and revenue synergies of $100 million will be reinvested in a bid to drive growth further.
The Transaction has been unanimously approved by both the McCormick and Unilever Boards of Directors. Completion is expected by mid-2027, subject to McCormick shareholder approval, receipt of required regulatory approvals and the satisfaction of other customary closing conditions.
“For Unilever, this transaction is another decisive step in sharpening our portfolio and accelerating our strategy towards high-growth categories as a€39 billion pureplay HPC company with a proven sector-leading growth profile,” commented Unilever CEO Fernando Fernandez.
“We are unlocking trapped value through a growth-led separation of Foods, creating a scaled, global flavour powerhouse. 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.
This is a combination built on strong strategic and cultural alignment, providing exciting opportunities for our people and ensuring our Foods brands continue to thrive as part of a global flavour leader. Our retained ownership stake reflects our conviction in the strength of the combined company and its future prospects.”
McCormick CEO Brendan Foley added: “This transformative combination accelerates McCormick’s strategy and reinforces our continued focus on flavour. 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.
“Unilever Foods’ global portfolio of strong brands, combined with our proven expertise in insight-driven brand-building and integration, will enable us to deliver flavour in new and exciting ways for more consumers, driving significant growth across the combined portfolio and value for all stakeholders.
“Integrating two global organisations of this scale requires disciplined execution, and we are confident that our detailed integration roadmap, experienced teams from McCormick and Unilever, external advisors and our strong partnership will enable us to capture the full value of this opportunity.
“McCormick is the right partner for Unilever Foods’ brands and employees, and our shared culture and values will empower our combination. We are excited to welcome their exceptional talent and international expertise to our Power of People culture.”
The news comes after previous rumours that Unilever was in talks to merge its foods business with Kraft Heinz. Anonymous sources told the Financial Times that the merger would unite Unilever’s food business and Kraft Heinz’s condiments division, with a single entity expected to own major brands like Heinz and Hellmann’s.
In response to the speculation, Unilever confirmed that it had received an inbound offer for its foods business, but that it was instead in discussions with McCormick. At the time, it could not confirm the certainty of the transaction.
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