This move represents Unilever CEO Fernando Fernandez’s most significant initiative since he assumed leadership about a year ago.
According to the deal’s terms, the British consumer goods giant will separate its food division and integrate it with McCormick using a tax-efficient structure known as a Reverse Morris Trust.
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Unilever and its shareholders will hold a 65% ownership stake in the new entity, in addition to Unilever receiving $15.7 billion in cash, as stated in a joint announcement from the companies.
Since 2022, Unilever has faced mounting pressure to offload its food brands, especially after it was disclosed that billionaire activist investor Nelson Peltz had acquired a stake in the firm.
While its food unit is known for higher margins, its sales growth has fallen short compared to the personal care and beauty division, which features brands like Dove and Axe, impacting Unilever’s overall sales goals.
However, investors reacted negatively to the news, voicing concerns about the deal’s structure, causing Unilever’s shares traded in London to drop over 7% to a one-year low, while shares of McCormick in the U.S. saw declines of up to 10%.
An analyst from RBC remarked that although the deal will transform Unilever into a company focused solely on household and personal care products, the spin-off with McCormick does not, quote, “strike us as a smooth way of bringing it about”.
In the past year, Unilever has divested various non-core food assets, including its billion-euro ice cream business, which includes brands like Ben & Jerry’s and Magnum.
(Edited by : Juviraj Anchil)
