Reckitt Benckiser confirms £3.2bn tie-up with US food group McCormick
Household goods giant Reckitt Benckiser has confirmed a 4.2 billion US dollar (£3.2 billion) deal to sell food brands including French's mustard and Frank's hot sauces to the maker of Schwartz spices.
US group McCormick fought off a number of rival bidders to secure the British firm's food business in a move that will propel it to the number one position in America's condiments market.
It comes a year after McCormick's takeover battle to buy London-listed Mr Kipling's cake firm Premier Foods failed.
McCormick said Reckitt's food arm was a "perfect match" for the group and pledged to keep the well-known brand names, which also include Cattlemen's BBQ Sauce.
The deal will create a combined group with annual sales of around 5 billion US dollars (£3.8 billion)
McCormick boss Lawrence Kurzius said: "The addition of Frank's RedHot hot sauce, the clear consumer favourite in an attractive and high-growth category, French's Mustard and the other beloved products enables McCormick to become a one-stop shop for condiment, spice and seasoning needs."
Frank's RedHot sauce is the number one brand in its market in the US and Canada, as is French's Mustard.
Rakesh Kapoor, chief executive of Reckitt, said the sale is in line with its aims to refocus the group on its consumer health and cleaning products, which span a vast array of brands from Durex to Dettol.
He said: " This transaction marks another step towards transforming Reckitt Benckiser into a global leader in consumer health and hygiene, ensuring we continue to deliver for shareholders and give people innovative solutions for healthier lives and happier homes."
Reckitt recently bought US baby formula maker Mead Johnson Nutrition in a mammoth 21.2 billion US dollar (£16.3 billion) deal to expand its consumer health arm.
Reckitt's food business has its headquarters in Chester, New Jersey, in the US.
It employs 450 people, including 360 staff at a manufacturing site in Springfield, Missouri.
McCormick has said it wants to strip out around 50 million US dollars (£38 million) in costs after the takeover, which is expected to complete in the third quarter of the year.
Savings are set to be made across selling, general and administrative expenses and the cost of goods sold.
McCormick beat a raft of competitors to secure the deal, said to have included Marmite maker Unilever and US giant Hormel, which owns brands including Spam.
McCormick walked away from a takeover tussle for Premier last year after having three bid approaches worth up to £537 million rejected.
It said it could not pay a price that would be accepted by the Premier board.
Reckitt launched a strategic review of its food arm in April, saying it was "non-core" to the group.
Experts in the City said Reckitt had secured a better-than-expected price for its food business.
Darren Shirley, an analyst at Shore Capital, said: "Reckitt is achieving a very attractive valuation for a North American food business, in our view."