31 March 2026
If you are covering confirmation of the merger of Unilever’s food business with McCormick, please find below a comment from Chris Beckett, consumer staples analyst at Quilter Cheviot:
“It has been confirmed that a new food powerhouse will emerge following Unilever’s decision to merge its food division with McCormick. The deal will be transformational for McCormick, giving it globally recognised brands and scale for it to compete. It is likely to show the business a lot more love than it got from Unilever.
“Unilever, meanwhile, can look to sell this as a successful sale given it allows it focus on the higher growth areas such as personal care products. However, Unilever and its shareholders will still own 65% of the new entity, making one question whether or not this is a sale at all. That size of shareholding will weigh on the stock, so it is good to see Unilever look to address this in an orderly way.
“The terms of the deal are important with both synergies and dyssynergies to be larger than we expected, while the valuation placed on the business looks okay in the current market. The new business is taking on a lot of debt, although a little less than the market may have expected, while Unilever will use some of the proceeds to embark on a share buyback program which will be helpful.
“The market, so far, has not reacted well to the news, however. Completion is not expected until mid-2027, which is a long time and introduces risks that mean it could be stopped. That said, Unilever has clearly found a willing partner to take on the food business, and allowing it focus on high growth areas is undoubtedly a good thing. Conglomerate structures are never the best performing businesses. Despite the greater scale, they can often be complex, so it makes sense for Unilever to take opportunities to streamline and given the spinoff of the ice cream business last year, this was a logical next step for Unilever. It now just needs to execute this transaction well, and retrain its focus on markets where it has been doing well.”
