Unilever PLC Sponsored ADR (UL.US) is close to completing the sale of its food business to McCormick & Company, Incorporated (MKC.US), making it the largest deal in the history of both companies.

Unilever PLC Sponsored ADR (UL.US) announced that negotiations to sell most of its food business to McCormick & Company, Incorporated (MKC.US) have entered the final stages, with the final deal expected to be officially announced later on Tuesday. This move is of historical significance and will reshape the strategic landscape of both companies. Unilever PLC Sponsored ADR stated on Tuesday that it plans to divest most of its food business for $15.7 billion in cash plus equity in McCormick & Company, Incorporated, excluding certain operating entities such as those in India. Unilever PLC Sponsored ADR did not disclose specific details regarding the equity portion of the deal. After the transaction is completed, Unilever PLC Sponsored ADR and its shareholders will hold 65% of the merged company. The deal will be structured as a "reverse Morris trust," a tax-efficient method of mergers and acquisitions. For both companies, this is their largest deal in their respective histories. The deal will propel Unilever PLC Sponsored ADR to become a leading global company in the beauty, personal care, and home care sectors, while helping McCormick & Company, Incorporated become a giant in the global spice, condiment, and sauce industry. Unilever PLC Sponsored ADR has a nearly century-long history in the food business, with strong brands such as Hellmann's mayonnaise, Knorr soup cubes, as well as regional products like Dijon mustard and Marmite. The acquisition of this food business is an ambitious move for McCormick & Company, Incorporated. McCormick & Company, Incorporated is well-known for its iconic red and white spice tins, as well as condiments like French's mustard and Frank's RedHot sauce. McCormick & Company, Incorporated is much smaller in size compared to Unilever PLC Sponsored ADR, with its overall revenue only equaling half of Unilever PLC Sponsored ADR's food business. In recent years, large food companies like Unilever PLC Sponsored ADR have faced growth pressures due to declining consumer purchasing power or a shift towards cheaper private label brands. Additionally, the popularity of GLP-1 weight loss drugs has led to users consuming less or opting for fresher foods. Unilever PLC Sponsored ADR's CEO, Fernando Fernandez, has stated that the company will focus on beauty, personal care, and health as core growth areas in the future, rather than the food sector. The transaction has sparked mixed reactions in the market. Some analysts believe that the deal will help both companies achieve synergies in procurement and production, allowing Unilever PLC Sponsored ADR to focus more on high-growth areas. However, RBC Capital Markets analyst James Edwardes Jones expressed some skepticism towards Unilever PLC Sponsored ADR's sale of the food business. He pointed out that the food business currently controlled by Unilever PLC Sponsored ADR is mainly dominated by Hellmann's mayonnaise and Knorr soup cubes, and after the deal is completed, the company will only hold partial ownership of a more diversified brand portfolio. "We are not certain of the rationale of introducing a more diversified business structure while retaining only partial ownership," he stated. For McCormick & Company, Incorporated, the deal will significantly enhance its presence in the rapidly growing spice and condiment market. Currently, this business only accounts for about 4% of its total sales, but it is growing rapidly among young consumers. McCormick & Company, Incorporated has been continuously expanding through acquisitions over the past decade. Its largest deal in the seasoning industry occurred about ten years ago when it acquired the food business of Reckitt Benckiser for $4.2 billion, bringing brands like French's and Frank's RedHot under its umbrella. It is worth noting that this deal does not include Unilever PLC Sponsored ADR's business in India. The company's strength in the Indian market mainly comes from its powerful distribution networkby efficiently replenishing small retailers through a widespread distribution system. RBC estimates that the India business accounts for approximately 11% of Unilever PLC Sponsored ADR's food division.