UPDATE: Unilever and McCormick deal imminent amid "advanced" talks

(Alliance News) - Unilever PLC said it may finalise a business combination with US seasoning brand McCormick & Co Inc later Tuesday, as "advanced discussions" continue.

Shares in Unilever rose 0.7% to 4,560.00 pence on Tuesday morning in London, giving it a market capitalisation of GBP100.08 billion. McCormick shares were up 2.9% at USD55.30 in the New York pre-market. It had a market cap of USD14.42 billion at its Monday closing share price of USD53.72.

On the table is a merger of Unilever's Foods business, excluding assets such as its business in India, with McCormick. The upfront cash consideration would be around USD15.7 billion, though the deal would be satisfied mainly through McCormick shares, Unilever said. It expects to own 65% of the enlarged company.

This tracks with sources cited by the Financial Times earlier Tuesday, which indicated that a deal was set to be announced later Tuesday, when McCormick publishes first-quarter results.

The FT sources said the deal would be via cash and shares, and that Unilever investors would hold two-thirds of the new company, which is expected to be worth USD60 billion in its entirety.

Unilever said on Tuesday: "The transaction would be undertaken by a Reverse Morris Trust, which is intended to be tax-free for US federal income tax to Unilever and its shareholders. Full terms will be announced if a transaction is agreed."

The London-based consumer goods firm earlier this month disclosed an inbound offer for its Food division, which includes Hellman's mayonnaise, Knorr stock cubes and Colman's mustard. At the same time, Unilever confirmed that it had entered talks with Hunt Valley, Maryland-based food ingredients and flavours company McCormick.

A deal between the two firms would follow would follow the demerger of Unilever's ice cream business into Magnum Ice Cream Co NV, which completed last year. Unilever has kept a stake of almost 20% in the frozen desserts business, which it will sell down over the coming years.

After the ice cream spin-off, the food division booked 2025 sales of EUR12.9 billion, just under 26% of total group sales of EUR50.5 billion and a 22.6% underlying operating profit margin, versus 20.0% for the group. McCormick, meanwhile, reported net sales of USD6.84 billion for the financial year that ended November 30 and a gross profit margin just shy of 38%.

Unilever had previously outlined plans to offload around EUR1.5 billion of local food brands in Europe, as it shifts focus to its beauty, personal care and wellbeing offering.

Around mid-March, the FT reported that Unilever had been in discussions with Kraft Heinz Co for a potential merger of their food brands. Those talks have since ended, according to the FT, but had concerned a combination of Unilever Foods and Kraft Heinz condiments.

By Holly Munks, Alliance News reporter

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