In a deal worth £33.7 billion, US firm McCormick has agreed to take on Unilever’s prized food division, with the merger set to create a new food manufacturing powerhouse.
Investors, however, have found the news hard to swallow, with shares in both companies dropping dramatically after the move was confirmed earlier this week.
Unilever saw its shares tumble by 7% following the news, wiping an estimated £5.3 billion off its market value, while McCormick stock dropped by 5%.
Analysts and investors have expressed concerns over the so‑called ‘megamerger’, which isn’t set to be approved until mid‑2027.
Criticism has so far centred on the structure of the deal, which will see the food division merge for cash and equity with McCormick, leaving Unilever with 65% control of the spin‑off entity. Concerns have also been raised over potential integration issues and regulatory risks.
Speaking to our sister publication The Grocer, James Edwardes Jones of RBC said: “What we really can’t get our heads round is why Unilever is disposing of a business dominated by two brands, of which it owned 100%, for a minimal control premium and leaving its shareholders with a 55% shareholding in a sprawling food business.”
“We’re also dubious about the cultural justification for combining a brand‑oriented business in Unilever with McCormick’s spices and flavours business, which is less brand‑oriented. It’s true it will leave Unilever as a pure‑play HPC business, but this does not strike us as a smooth way of bringing it about.”
Calling the deal a “curious partial exit”, Julian Wild, director at Wilkin Chapman Rollits, however, believes shareholders will be “heaving a sigh of relief”.
He added: “It does at least draw some sort of line under this protracted process and allows Unilever to move on
. It does show the difficulty when businesses get too big to manage effectively. That will be a task for the management of the new entity.”
The deal also comes at a difficult time for the food manufacturing sector, which is facing a variety of generational challenges, including a global cost‑of‑living crisis, changing consumer behaviours, the advent of GLP‑1s and a rapidly developing supply chain crisis sparked by the Iran War.
