McCormick and Co., the Sparks-based spice and flavorings giant, announced late Tuesday that it will acquire the maker of Frank's RedHot Hot Sauce, French's Mustard and other leading brands in a $4.2 billion deal.
The deal to acquire the food business of United Kingdom-based Reckitt Benckiser Group would position McCormick as a leading maker of condiments in the United States, the company said. The French's and Frank's RedHot brands would join McCormick's top brands, the company said.
The deal would make McCormick a "one-stop shop" for condiments, spices and seasonings, Lawrence E. Kurzius, McCormick's chairman, president and CEO, said in a statement. The brands being acquired also include the Cattlemen's line of BBQ sauces.
"The acquisition of RB Foods strengthens McCormick's flavor leadership with the addition of the iconic French's and Frank's RedHot brands to our portfolio, which will become our number two and number three brands, respectively," Kurzius said. "RB Foods' focus on creating products with simple, high-quality ingredients makes it a perfect match for McCormick as we continue to capitalize on the growing consumer interest in healthy, flavorful eating."
The new brands would drive the company's net sales to $5 billion a year, up from about $4.4 billion right now, it said.
While McCormick enjoys a top position in the domestic spice market, its condiments business is small, ranking No. 10 nationwide. It makes cocktail sauces, some flavored mayonnaises and a variety of seafood sauces.
Reckitt Benckiser, a consumer conglomerate that also makes products such as Veet hair remover, Air Wick air fresheners, Lysol cleaner and Durex condoms, made a $17.9 billion deal in February to buy baby-food maker Mead Johnson Nutrition Co.
McCormick is only buying Reckitt Bensicker's condiments unit.
The company said in April that it had started a "strategic review" of its non-core food business, as it hoped to bolster sales growth after a damaging boycott in South Korea and the failure of its latest Scholl footcare innovation, according to a report on the deal in the Financial Times. The company said in April that its foods business is "nevertheless non-core to RB," the Financial Times reported.
The Financial Times reported the deal late Tuesday before it was announced by McCormick. McCormick said it expects to complete the deal in the third or fourth quarter of its fiscal year, or by the end of November.
McCormick has been on a buying spree the last few years, but the acquisition of Reckitt Bensicker's food business would be its largest acquisition by far.
It has made five acquisitions, including Gourmet Garden, an Australian maker of packaged herbs acquired in April, and Cajun Injector, a maker of injectable marinades and seasonings. It closed a deal to buy the maker of Stubb's barbecue sauces for $100 million in 2015. It attempted to buy the British food company Premier Foods plc early last year for $700 million but the deal was rejected.
McCormick said it would host a conference call with investors on the Reckitt Benckiser deal on Wednesday morning.
McCormick said the deal with add to its debt, but said it expected the brands to grow considerably with the help of the infrastructure McCormick has across the world to support its brands. The company predicted strong growth for Frank's RedHot, which it said was popular with millennials.
The company said it expects to realize cost savings of about $50 million by 2020 as it brings Reckitt Bensicker's business in house. While the acquisition will be financed in part by debt, the company said it expects to retain its investment grade bond rating.
McCormick shares were up 15 cents at $97.29 each in after hours trading late Tuesday.
"McCormick will be able to grow these brands in new and unique ways through our proven track record of insight-driven innovation and the ability to leverage our global footprint," Kurzius said.