Unilever, McCormick strike deal to create $65 billion food giant

Unilever on Tuesday said it will merge its food business with spice maker McCormick to create a company worth around $65 billion in one of the largest food transactions in history.

It's also Unilever CEO Fernando Fernandez's biggest gambit since taking the helm roughly one year ago.

Under the terms of the deal, the British consumer goods giant will spin off its food division and merge it with McCormick in a tax-efficient structure known as a Reverse Morris Trust.

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Unilever and its shareholders will have a 65% stake in the combined company, with Unilever also receiving $15.7 billion in cash, the companies said in a joint statement.

Unilever has faced increased pressure to shed its food brands since 2022, when it was revealed that billionaire activist shareholder Nelson Peltz had built a stake in the company.

Though its food unit is a high-margin business, sales growth has lagged its personal goods and beauty division, which includes Dove soaps and Axe deodorant, and weighed on Unilever's ambition to increase overall sales.

Investors, however, soured on the news, criticising the deal's structure and sending Unilever's London-traded shares down more than 7% to a one-year low. Shares of US-based McCormick tumbled as much as 10%.

An RBC analyst said that while the deal will leave Unilever as a pure-play household and personal care business, the spin-off with McCormick does not, quote, "strike us as a smooth way of bringing it about".

Over the past year, Unilever has divested several non-core food assets, including its multi-billion euro ice cream business, home to Ben & Jerry's and Magnum.