McCormick Adds French’s Mustard to Lineup

The $4.2 billion acquisition of RB Foods will enable McCormick to "become a one-stop shop for condiment, spice and seasoning needs."
Matthew HellerJuly 19, 2017

In its largest acquisition ever, spice maker McCormick & Co. has agreed to buy the food business of Britain’s Reckitt Benckiser for $4.2 billion, adding such popular brands as French’s mustard and Frank’s Red Hot to its lineup of condiments.

Some analysts were expecting a price tag of no more than $3 billion for RB Foods — which has been up for sale since the spring — but McCormick was willing to pay more for a business it believes will make it a condiment powerhouse. Frank’s is the No. 1 hot sauce brand in the U.S. and Canada.

“The addition of Frank’s RedHot Hot Sauce, the clear consumer favorite in an attractive and high-growth category, French’s Mustard and [RB Foods’ other] products enables McCormick to become a one-stop shop for condiment, spice and seasoning needs, providing our customers and consumers with an even more diverse and complete flavor product offering,” McCormick CEO Lawrence Kurzius said in a news release.

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He told the Baltimore Sun that McCormick stepped up with an aggressive bid because “We really wanted it. The asset is incredibly strategic to us … We were willing to step up to stretch for it a little bit.”

On news of the deal, McCormick shares fell 5.3% to $91.97 in trading Wednesday. Moody’s also said it had placed the company’s A2 credit rating on review for a possible three-notch downgrade, citing the $3.7 billion in debt that it will take on to finance the deal.

“The price is a little steep,” said Brittany Weissman, a consumer analyst with Edward Jones. “It’s an expensive acquisition.”

But company officials said it will boost McCormick’s earnings and profit margins and increase annual sales to $5 billion a year, up from about $4.4 billion. “McCormick expects to … significantly expand the global presence of Frank’s RedHot and French’s, which we expect will result in substantial growth and increased household penetration,” the company said.

“Major food brands have become takeover targets in recent years as their owners look to breathe new life into mature brands,” The New York Times noted. “Consumers also are increasingly looking for higher-value or more exotic foods to add to their kitchen cabinets.”