U.S. spices maker McCormick & Co agrees to buy Reckitt Benckiser Group's food business for a higher-than-expected $4.2 billion in a deal that comes as Reckitt moves to cut debt following its $16.6 billion purchase of baby formula maker Mead Johnson. David Pollard reports.
It may not look like a battle ground. But this is where the fight's getting fierce. The world's biggest food and consumer goods makers jostling for position in a tough market. This time: the UK's Reckitt Benckiser selling its food division to McCormick of the United States. (SOUNDBITE) (English) JEREMY STRETCH, HEAD OF G10 FX STRATEGY, CIBC, SAYING: "We're seeing a number of these companies in the sector looking at particular parts of the market and deciding that that's where they would rather focus rather than being very much a broad brush food conglomerate or a sectoral conglomerate." McCormick is paying 4.2 billion dollars for assets which include Reckitt's French mustard and Frank's RedHot sauce brands. At over seven times earnings - analysts say that price too may be rather spicy. If necessary for Reckitt - to help pay off a debt pile from its 16 billion dollar takeover this year of Mead Johnson. And to compete in a sector where after Kraft Heinz's failed bid for Unilever, deals are the flavour of the month. (SOUNDBITE) (English) JEREMY STRETCH, HEAD OF G10 FX STRATEGY, CIBC, SAYING: "Officials of each individual company are looking at the way to enhance shareholder value in the most optimal way. And this is the way to perhaps unlock shareholder value. Sell long core assets or allow non core assets to be bid for by competitors." Unilever is believed to have wanted the Reckitt division itself - though might also sell off some of its own food assets. While Nestle is thought to want to divest its confectionery division. This a sector that's far from set yet.