Unilever said on Tuesday it will merge its food business with spice maker McCormick in the second-largest food transaction in history, a deal that will create a company worth roughly $65 billion.
Unilever announced the deal in a press release posted to the company’s website. The transaction will be structured as a so-called Reverse Morris Trust, which offers tax benefits. Unilever will spin off the food division and then merge it with the Cholula hot sauce owner.
According to Reuters, Rothschild, which served as joint-lead financial adviser to McCormick, said the deal is the largest RMT transaction involving a European company.
Unilever and its shareholders will have a 65% stake in the fully diluted combined-company outstanding equity, equivalent to $29.1 billion based on McCormick’s one-month volume-weighted average price of $57.84, the companies said in a joint statement.
Unilever, a British consumer goods giant, will also receive $15.7 billion in cash. The deal values Unilever’s food business at nearly $45 billion and McCormick at about $21.0 billion, the companies said.
“There is logic in a disposal of the foods business where volumes have been muted over the past years,” Harsharan Mann, a portfolio manager at Unilever shareholder Aviva Investors, told Reuters. The RMT model is “sensible” given tax issues that had plagued similar deals in recent years, he added.
“Global peers such as Procter & Gamble have successfully used this structure in prior years for disposals of non-core businesses in a tax-free structure.”
