American spice company McCormick & Co. is buying the company that owns mustard and ketchup maker French’s and other condiments for $4.2 billion US.
Maryland-based McCormick has emerged as the highest bidder for Reckitt Benckiser’s food business, a consumer products colossus that makes products like Durex condoms, Frank’s RedHot sauce, Mucinex cold medicine, Woolite detergent, Clearasil acne treatment and, of course, French’s, best known for mustard.
Only the food products are included in the deal.
Reckitt Benckiser put its food division up for sale in April, as it wanted to focus on its other product lines. And McCormick finally emerged as the highest bidder for the food unit on Wednesday.
French’s gained fame in Canada in recent years amid an unexpected nationalistic fight over ketchup. Market-leader Heinz took fire for closing its production facilities in Canada and French’s was an unexpected beneficiary of a consumer move toward their ketchup because it was made in Canada. The company has since pledged that all French’s ketchup sold in Canada will be made in Canada too.
McCormick, meanwhile, whose brands include Lawry’s and Old Bay seasonings and Billy Bee honey, is looking to solidify its position as a leader in condiments and flavouring.
McCormick is paying seven times Reckitt’s annual sales to buy the company, high by historical standards but the company was bidding to keep the French’s owner out of the hands of other rivals including Unilever and Hormel Foods.
Royal Bank analysts said it “feels to us like a very high price for a U.S. oriented ambient food business.”
But Morgan Stanley analysts said the high price tag confirmed the value placed on unique assets like French’s, which is the world’s leading mustard brand.