North Americans have taken to Cajun, now McCormick & Co. hopes to cultivate their palates for Thai.
The Sparks-based spice company announced a deal yesterday to buy an Oakland, Calif.-based manufacturer of easy-to-prepare Asian dishes for $97 million.
Epicurean International imports and markets the Thai Kitchen and Simply Asia brands of noodle and soup bowls, meal kits, coconut milk and sauces and pastes. The products are manufactured by suppliers in Asia and distributed to grocery stores, natural food stores, mass merchandisers and warehouse clubs in the United States.
McCormick Chief Executive Officer Robert J. Lawless said the purchase fits McCormick's strategy of buying regional market leaders. But it also reflects a growing taste in North America for ethnic foods, he said.
"It's [Epicurean] something we have been pursuing for some time, and it finally came to fruition," Lawless said.
Epicurean, which has about 100 employees, will be run independently under the same brand names, Lawless said, as McCormick has done with Zatarain's. McCormick bought the New Orleans-based manufacturer of Cajun-style rice and dinner mixes in 2003 for $180 million. Officials said Zatarain's has been well-received by distributors, though the line took a hit after Hurricane Katrina, which hurt sales in its prime Gulf Coast market.
With annual sales of $50 million, Epicurean has seen a 32 percent compound annual growth rate since 2002, according to McCormick. The $97 million purchase price reflects 11 times Epicurean's 2005 earnings before interest, tax, depreciation and amortization. McCormick will pay for it using cash from operations and short-term credit facilities.
The acquisition should add immediately to earnings and contribute to the 8 percent to 10 percent earnings per share growth rate the company is forecasting, officials said.
McCormick continues to seek acquisitions in certain growth categories while it undergoes a three-year restructuring that started last year. The company will shed between 800 and 1,000 workers worldwide through voluntary separations, attrition and consolidation of operations. The company dropped a quarter of its less-profitable clients in order to focus on its bigger ones, and has eliminated 25 percent of its underperforming products.
The restructuring, which is expected to cost between $130 million and $150 million, should save the company $50 million by 2008.
Shares of McCormick closed at $33.20 yesterday, down 46 cents, before the announcement of the Epicurean acquisition.