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Unilever is in discussions to sell its food division to spice and sauce maker McCormick, in a multibillion-dollar deal that would complete the consumer goods giant’s pivot to faster growing beauty and personal care brands.
The FTSE 100 group said on Friday that it had received an offer for the business, which includes brands like Marmite, Hellmann’s mayonnaise and Pot Noodle, and is expected to be valued at tens of billions of dollars, from the US company.
Unilever added there was “no certainty that any transaction will be agreed”.
“The Board believes Foods is a highly attractive business, with a strong financial profile led by market-leading brands in growing categories and is confident in the future of the Foods business as part of Unilever,” Unilever said in a statement on Friday.
Jefferies analysts estimate the value of a standalone Unilever food business at $36bn-$37bn, representing an enterprise value-to-ebitda multiple of 9.5 times.
A sale of the division would be a transformative step for Unilever, marking a shift away from a multi-category conglomerate to a group focused around beauty, home and personal care brands.
The company has been gradually withdrawing from its slower growth food business over the past decade, striking deals to carve out its spreads, tea and ice cream divisions.
Maryland-based McCormick, which makes annual revenues of $7bn and has a market capitalisation of more than $14bn, is known for its red-topped spice brands, as well as Cholula hot sauce and French’s mustard.
Bernstein analyst Callum Elliott said that as Unilever food was three times more profitable than McCormick, the deal could be structured along the lines of a so-called Reverse Morris Trust transaction.
This would see Unilever spin off the division and then merge it with McCormick, minimising tax and leaving Unilever shareholders retaining the majority of the merged entity.
“The attractiveness of such a combination for [Unilever] shareholders would clearly depend on the specific terms,” Elliott said, adding that there was a clear strategic fit between Hellmann’s mayonnaise and McCormick’s sauce brands.
The FT reported earlier this week that Unilever had previously held talks with Kraft Heinz on a possible merger of Unilever’s food business with Kraft Heinz’s condiments division.
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