Unilever announces the combination of Unilever Foods with McCormick to create a global flavour powerhouse with a superior growth profile

Unilever PLC (“Unilever”) and McCormick & Company, Inc. (“McCormick”) today announced that they have entered into an agreement to combine Unilever’s Foods business[a] (“Unilever Foods”) with McCormick.

The combination will create a scaled, global flavour powerhouse, bringing together two industry-leading, culturally-aligned foods businesses with strong momentum, superior top line growth and enhanced value creation. The combined business will house leading, iconic brands including McCormick, Knorr and Hellmann’s, and high growth potential brands including Cholula, Maille and Frank’s, as part of a global portfolio with revenues of $20 billion[b], based on fiscal year 2025 data (the “Transaction”).

The separation of Unilever Foods will position Unilever as a leading pureplay HPC company, with €39 billion of revenues based on fiscal year 2025 and a sector-leading growth profile. Post-completion, Unilever will operate across Beauty, Wellbeing, Personal Care and Home Care, with leading positions in attractive categories, fast-growing geographies and channels through a portfolio of high-performing, innovative brands.

The Transaction is another decisive step to reshape Unilever into a simpler, sharper, higher growth company, built upon synergistic capabilities across science-led innovation, demand creation and operational execution. Unilever has delivered superior performance versus the HPC sector over the last three years, demonstrating the Company’s market making abilities and competitive strengths, which, with even sharper focus, will further strengthen the value creation model for shareholders.

In this Transaction, Unilever and Unilever shareholders will receive a proportionate mix of McCormick’s existing voting and non-voting common stock, equating to 65.0% of the fully diluted combined company equity, equivalent to $29.1 billion[c] based on the last 1-month volume-weighted average McCormick share price of $57.84[c]. Unilever will also receive $15.7 billion in cash, subject to certain closing adjustments, that will offset one-off separation and tax costs; pay down debt to its current level of c.2.0x net debt to EBITDA following closing; and support €6 billion of share buy-backs expected to run between 2026 and 2029.

The Transaction reflects an enterprise value of $44.8 billion for Unilever Foods, equivalent to an EV/Sales ratio of 3.6x[d] and a 13.8x EV/EBITDA multiple[e] based on the last 1-month volume-weighted average McCormick share price of $57.84[c] which is in line with the current trading multiple for Unilever, and in line with the most attractive foods company valuations.

Combining McCormick and Unilever Foods

Upon closing, the Transaction will create two focused, faster-growing businesses in McCormick and Unilever, each better aligned to its categories, capabilities and value creation model.

The combination of Unilever’s Foods business with McCormick will create a global flavour powerhouse anchored in a portfolio of iconic brands across herbs, spices, seasonings, cooking aids, sauces and condiments. It will bring together complementary geographic footprints and a global leading presence across both retail and food service channels, with deep science and R&D capabilities to meet consumers’ growing demand for flavour.

The combined company will have a distinctive, attractive profile within the foods industry, with leading positions in growth categories and a quality financial model of superior growth, supported by strong gross margins and continuous elevated brand investment.

McCormick provides a natural home for Unilever Foods, given cultural alignment between the two companies, and a proven track record of successfully integrating acquired brands and investing behind them to accelerate growth.

The combined company will be led by the McCormick CEO and CFO, with senior management representation from Unilever Foods.

McCormick will retain its existing name; its Hunt Valley, Maryland global headquarters and NYSE listing. McCormick will establish international headquarters in the Netherlands and is planning a secondary listing in Europe.

Transaction Highlights

• Unilever and its shareholders will receive, in aggregate, shares equal to 65.0% of the fully diluted combined company equity and Unilever will receive a cash payment of $15.7 billion upon closing. Unilever shareholders will own 55.1% of the fully diluted combined company equity. Unilever will own a 9.9% stake, underscoring its support and confidence in the strategic merits, integration plan and execution of the combined company. Over time, and not earlier than one year after closing, Unilever intends to sell down its stake in an orderly and considered manner. McCormick shareholders will own 35.0% of the fully diluted combined company equity.
• The Transaction reflects an attractive valuation with an enterprise value of $44.8 billion for Unilever Foods, equivalent to an EV/Sales ratio of 3.6x[d] and an 13.8x EV/EBITDA multiple[e] based on the last 1-month volume-weighted average McCormick share price of $57.84[c] which is in line with the current trading multiple for Unilever, and in line with the most attractive foods company valuations.
• The combined company expects to realise approximately $600 million of annual run rate cost synergies net of growth reinvestments; with full value expected to be achieved by the end of year three. Incremental cost and revenue synergies of $100 million will be reinvested to further drive growth.
• The Transaction is expected to be structured as a tax-efficient "Reverse Morris Trust" transaction and is intended to be tax-free for U.S. federal income tax purposes to Unilever and its shareholders, thereby mitigating some of the overall transaction-related tax costs.
• Completion is expected by mid-2027, subject to McCormick shareholder approval, receipt of required regulatory approvals and the satisfaction of other customary closing conditions. Works Council consultation will also be conducted prior to closing of the Transaction.

A compelling value proposition for Unilever shareholders

Having carefully evaluated the potential strategic options for its Foods business, the Unilever Board believes the Transaction is in the best interests of Unilever’s shareholders. It will unlock value, enhance the Group’s structural growth profile and simplify the portfolio enabling greater speed of execution, repeatability at global level and enhanced returns on investment.

• Value unlock: The growth led separation of Foods at an Enterprise Value/Sales of 3.6x[d] and an Enterprise Value/EBITDA[e] of 13.8x (based on McCormick’s last month VWAP of $57.84[c]), unlocks value in line with Unilever’s overall valuation and with the most attractive foods company valuations. The upfront cash proceeds of $15.7 billion to be received by Unilever will offset one-off separation and tax costs; pay down debt to its current level of c.2.0x leverage; and, support €6 billion of share buy-backs expected to run between 2026 and 2029.
• Improved growth profile: Following the separation of Unilever Foods, Unilever will become a leading pureplay HPC business spanning Beauty, Wellbeing, Personal Care and Home Care. This focuses resources towards categories with strong structural growth and highest returns. The pro forma portfolio of Unilever (excluding the separated Foods business) has delivered a compound annual growth rate of 5.4% underlying sales growth in the last 3 years, alongside a gross margin of 48%, brand marketing investment levels of 18% and an underlying operating margin of 19%.

Following separation, and based on FY25 revenues, Unilever is expected to have:

• An enhanced category footprint, with Beauty, Wellbeing and Personal Care contributing c.67% of Group turnover (versus 51% in FY25) and with c.90% of Group revenues in #1 or #2 positions at a category/geography cell level (based on 322 cells’ market share). These categories share structural tailwinds driven by premiumisation, science-led innovation and exposure to faster-growing channels.
• A superior footprint in faster-growing markets, with anchor markets of the United States and India contributing 38% of Group turnover (versus 33% in FY25) and emerging markets contributing 62% of Group turnover (versus 59% in FY25). Exposure is increased to geographies with higher population growth, increasing urbanisation and number of households, growing female labour participation and wealth expansion.
• A structurally more premium portfolio with greater exposure to digital commerce.
• Global repeatability and speed, with one shared demand creation model and a common, integrated set of capabilities across complementary categories ensuring global repeatability and enhanced returns on investment:
  • “Desire at Scale” as its demand creation framework with ‘SASSY’ brands at its core
  • A scaled R&D backbone to accelerate disruptive premium innovation, built on common science and technology platforms - in areas such as formulation design, microbiome, surfactants, fragrances and packaging design - alongside shared digital and AI-led discover and design, regulatory and laboratory infrastructure
  • An integrated value chain across the procurement of materials, manufacturing equipment and processes, and operations in manufacturing and distribution.

Medium term value creation algorithm

Unilever reaffirms its commitment to and confidence in delivering on its medium-term value creation algorithm, with mid-single digit underlying sales growth, underpinned by at least 2% underlying volume growth and continued modest improvement in operating margin.

The capital allocation framework remains unchanged, prioritising disciplined investment behind organic growth and productivity (23% of revenue in R&D, brand marketing investment and capital expenditure), and allocating approximately €1.5 billion a year to bolt-on acquisitions. Capital returns will include a dividend payout ratio of approximately 60%, alongside €6 billion of share buy‑backs expected to run between 2026 and 2029.

Unilever expects €400-500 million of stranded costs as a result of separating the Unilever Foods business. One-off restructuring costs of €500 million, incurred over 2027 to 2029, will be allocated to offset these stranded costs. A Transitional Services Agreement in support of the combined company will be put in place for around two years, encompassing areas such as information technology and distribution (sales and logistics), and will provide transition headroom.

No revenue dis-synergies are expected from the separation of the Unilever Foods business.

Fernando Fernandez, Chief Executive Officer of Unilever, commented:

“For Unilever, this transaction is another decisive step in sharpening our portfolio and accelerating our strategy towards high-growth categories as a€39 billion pureplay HPC company with a proven sector-leading growth profile.

We are unlocking trapped value through a growth-led separation of Foods, creating a scaled, global flavour powerhouse. By combining Unilever Foods’ iconic leading brands and global reach with McCormick’s exceptional portfolio, category expertise and capabilities, we are establishing a focused, high-quality business with significant top line growth and value creation potential.

This is a combination built on strong strategic and cultural alignment, providing exciting opportunities for our people and ensuring our Foods brands continue to thrive as part of a global flavour leader. Our retained ownership stake reflects our conviction in the strength of the combined company and its future prospects.”

Brendan Foley, Chief Executive Officer of McCormick, commented:

"This transformative combination accelerates McCormick’s strategy and reinforces our continued focus on flavour. The Unilever Foods business is one we have long admired, with a portfolio that complements our existing business, capabilities and long-term vision. Together, we will be better positioned to accelerate growth in attractive categories. This combination will create a diversified flavour leader with a robust growth profile that remains differentiated by its focus on flavouring calories while others compete for them.

Unilever Foods’ global portfolio of strong brands, combined with our proven expertise in insight-driven brand-building and integration, will enable us to deliver flavour in new and exciting ways for more consumers, driving significant growth across the combined portfolio and value for all stakeholders. Integrating two global organisations of this scale requires disciplined execution, and we are confident that our detailed integration roadmap, experienced teams from McCormick and Unilever, external advisors and our strong partnership will enable us to capture the full value of this opportunity. McCormick is the right partner for Unilever Foods’ brands and employees, and our shared culture and values will empower our combination. We are excited to welcome their exceptional talent and international expertise to our Power of People culture."

Transaction Structure and Details

Under the terms of the agreement, Unilever is expected to combine Unilever Foods with McCormick in a “Reverse Morris Trust” transaction that is intended to be tax-free to Unilever and its shareholders for U.S. federal income tax purposes, thereby mitigating some of the overall transaction-related tax costs.

Unilever and Unilever shareholders will receive a proportionate mix of McCormick’s existing voting and non-voting common stock equating to 65.0% of the fully diluted combined company equity, equivalent to $29.1 billion[c] based on the last 1-month volume-weighted average McCormick share price of $57.84[c]. Unilever will also receive $15.7 billion in cash, subject to certain closing adjustments. The Transaction implies an enterprise value for Unilever’s Foods business of approximately $44.8 billion.

At closing, Unilever shareholders will own 55.1%, McCormick shareholders will own 35.0% and Unilever will own 9.9% of the fully diluted combined company's equity.

Transitional services arrangements in support of the combined company will be put in place post-closing encompassing areas such as information technology and distribution (sales and logistics).

The Transaction has been unanimously approved by both the McCormick and Unilever Boards of Directors.

Upon closing of the Transaction, the combined company’s net leverage is expected to be 4.0x or less. The combined company is expected to maintain an investment grade credit rating and return to 3.0x net within two years after closing.

McCormick has received $15.7 billion in committed bridge financing from Citigroup Global

Markets Inc, Goldman Sachs Bank USA and Morgan Stanley Senior Funding, Inc., and intends to fund the cash component of the purchase price through a combination of cash from its balance sheet and proceeds from new debt issuance.

The Transaction is expected to close by mid-2027, subject to McCormick shareholder approval, receipt of required regulatory approvals and the satisfaction of other customary closing conditions. Works Council consultation will also be conducted prior to closing of the Transaction.

Under the Merger Agreement, McCormick must pay Unilever a termination fee equal to $420 million if Unilever terminates the agreement because the McCormick board changes its recommendation in favour of the Transaction or in certain circumstances where the Merger Agreement is terminated and McCormick enters into a competing transaction. An expense reimbursement payment of up to $75 million will be payable by McCormick to cover certain expenses incurred by Unilever in connection with the Transaction in the event that the required McCormick shareholder approvals related to the Transaction are not obtained (other than in circumstances where the termination fee is payable).

Source: Adaderana