March 20 (Reuters) - Hellmann's mayonnaise maker Unilever said on Friday it has received an offer for its foods business and is in discussions with McCormick & Company Inc. (Reporting by Prerna Bedi
Unilever in talks to sell food business to smaller US rival McCormick
Unilever Considers Divesting Food Business Amid Strategic Shift
By Richa Naidu, Yadarisa Shabong and Lisa Jucca
LONDON, March 20 (Reuters) - Unilever is in talks to sell its foods business to smaller rival McCormick & Company, potentially marking a major shift for the British consumer goods company as it focuses on higher-growth beauty, household and personal care businesses.
London-listed Unilever, owner of Hellmann's mayonnaise and Knorr stock cubes, said on Friday spice maker McCormick had made an offer concerning its foods business. Both companies said discussions were ongoing and that there was no certainty a deal would be agreed, providing no financial details.
The talks are an acceleration of Unilever CEO Fernando Fernandez's plan to shift Unilever towards faster-growing non-food categories after spinning off its ice cream business last year.
Market Reactions and Strategic Rationale
Investor Sentiment and Share Price Movements
SIMPLICITY TRUMPS SCALE
Shares in Cholula hot sauce owner McCormick fell as much as 2.6% in early trade to their lowest since June 2018. Unilever's shares were up 1% on the day, after losing more than 6% over two sessions as media speculation about the fate of the food assets spread.
"We think it is sensible that Unilever are looking at options for their food business," said Richard Saldanha, global equity portfolio manager at Aviva, a Unilever investor. "It’s clear the company wants to focus on areas such as personal care and beauty where underlying category and volume growth are more attractive."
Performance of Unilever's Food Division
Unilever's food business made up about a quarter of its total sales in 2025, generating more than 12.9 billion euros ($14.91 billion) last year.
But the division is growing more slowly than Unilever's overall business and faces headwinds from a move away from processed foods. Politicians, including U.S. Health Secretary Robert F. Kennedy Jr, have warned about their health risks and as many consumers are turning to GLP-1 weight-loss drugs, which mean people eat less.
More broadly, many consumer goods and retail companies are trimming portfolios and changing leadership structure in response to challenges from tariffs, tepid global consumer demand and, more recently, rising energy prices.
"The benefits of scale across (product) categories no longer outweigh the drawbacks of complexity," Bernstein analysts said in a note.
Deal Structure and Financial Implications
Potential Valuation and Challenges
BIG BITE TO SWALLOW
Analysts at Barclays estimated the enterprise value of Unilever's food division at between 28 billion euros ($32.38 billion) and 31 billion euros.
That could represent a big mouthful for McCormick to swallow. The U.S. company has a market capitalisation of about $14.5 billion, making it much smaller than the potential value of Unilever's food business. Unilever's overall market cap is about $136 billion.
Tineke Frikkee, a portfolio manager at W1M, a Unilever investor, questioned the value for investors of the potential transaction.
"This potential deal seems complex, McCormick is much smaller than Unilever Food - Unilever Food generates around 3x the profit of McCormick - so unclear what value can be created as a combined entity, and what structure can be proposed that offers value to shareholders."
Unilever's Previous Portfolio Adjustments
Unilever has long been looking to slim down its food portfolio, identifying non-core European food brands worth $1 billion to $1.5 billion for the chop.
Provided Unilever gets a good price, selling the food division makes sense, said Jack Martin, investment director at Unilever investor Oberon Investments.
"It is a big chunk of the value of the business, so it is very important for Fernandez and his team to get this right."
Details of McCormick's Offer and Deal Mechanisms
Background and Previous Acquisitions
UNSOLICITED OFFER
McCormick's offer was unsolicited, according to one person familiar with the situation.
Its last high-profile deal was in 2020 when it paid around $800 million for Cholula. In 2017, it paid $4.2 billion to purchase Reckitt's North American food business, including brands such as Frank's RedHot and French's mustard.
The company has bid on other condiments and spice makers but not come out on top.
Possible Deal Structures
McCormick's smaller size could complicate any deal. Some analysts and bankers said a deal could be structured as a "Reverse Morris Trust transaction", which offers a tax‑efficient way for a company to sell a business.
"A deal would likely be structured along the lines of a Reverse Morris Trust transaction, with Unilever essentially spinning off its Food division, to then merge with McCormick and Unilever shareholders retaining the majority of the combined entity," Bernstein analysts said in their note.
Media Reports and Alternative Scenarios
The companies' confirmation of talks came after the Wall Street Journal first reported them late on Thursday.
The Financial Times reported earlier this week that Unilever had weighed merging its food assets with Kraft Heinz's condiments business but the merger talks had ended.
($1 = 0.8650 euros)
(Reporting by Yadarisa Shabong, Prerna Bedi and Aishwarya Venugopal in Bengaluru, Lisa Jucca in Milan, Richa Naidu and Alexander Marrow in London, Writing by Lisa Jucca and Alexander Marrow; Editing by Nivedita Bhattacharjee, Tomasz Janowski and Jane Merriman)
