UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 18, 2017
McCormick & Company, Incorporated
(Exact name of registrant as specified in its charter)
Maryland | 001-14920 | 52-0408290 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
18 Loveton Circle Sparks, Maryland | 21152 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (410) 771-7301
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 7.01 Regulation FD Disclosure.
On July 18, 2017, McCormick & Company, Incorporated, a Maryland corporation (“McCormick”) issued a press release announcing the execution of a Stock Purchase Agreement, dated as of July 18, 2017, by and among McCormick, The R.T. French’s Food Group Limited, a private limited company incorporated in England and Wales, Reckitt Benckiser LLC, a Delaware limited liability company, and Reckitt Benckiser Group plc, a public limited company incorporated in England and Wales. Furnished with this Form 8-K as Exhibit 99.1 is a copy of such press release entitled “McCormick to Acquire Reckitt Benckiser’s Food Division”.
On July 19, 2017, McCormick disseminated an investor presentation to be used in connection with a conference call to discuss the proposed acquisition. Furnished with this Form 8-K as Exhibit 99.2 is a copy of the investor presentation labeled “McCormick to Acquire Reckitt Benckiser’s Food Division”.
The information in this Item 7.01, including Exhibits 99.1 and 99.2 attached hereto, (i) is furnished pursuant to Item 7.01 and shall not be deemed “filed” for any purpose; and (ii) shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in such filing.
Cautionary Note Concerning Forward-Looking Statements
Certain information contained herein and in the exhibits that are not statements of historical or current fact constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the use of words such as “may,” “will,” “expect,” “should,” “anticipate,” “intend,” “believe” and “plan.” The forward-looking statements contained in this Form 8-K include, without limitation, statements related to: the planned acquisition of Reckitt Benckiser’s food division and the timing and financing thereof; the ability to obtain regulatory approvals and meet other closing conditions for the planned acquisition; the expected impact of the planned acquisition on, among others, McCormick’s net sales, expected trends in net sales, earnings performance and other financial measures; expectations regarding improved scale, growth potential in various products, geographies and market categories, including the impact from innovation, a more diverse product offering and millennial household penetration; expectations regarding growth in the Hot Sauce category; the realization of anticipated cost synergies, margin expansion and adjusted earnings per share accretion from the acquisition; the ability to retain key personnel; and the anticipated sufficiency of future cash flows to enable the payments of interest and repayment of short- and long-term debt as well as quarterly dividends.
These and other forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by factors such as: risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable antitrust legislation and other regulatory and third party consents and approvals; potential volatility in the capital markets and its impact on the ability to complete the proposed debt and equity financing necessary to satisfy the purchase price; failure to retain key management and employees of the target companies; issues or delays in the successful integration of the target companies’ operations with those of McCormick, including incurring or experiencing unanticipated costs and/or delays or difficulties; difficulties or delays in the successful transition of the target companies’ business from the information technology systems of the sellers to those of McCormick as well as risks associated with other integration or transition of the operations, systems and personnel of the target companies, each, as applicable, within the term of the six-month post-closing transition services agreement between McCormick and the sellers; future levels of revenues being lower than expected and costs being higher than expected; failure or inability to implement growth strategies in a timely manner; unfavorable reaction to the acquisition by customers, competitors, suppliers and employees; conditions affecting the industry generally; local and global political and economic conditions; conditions in the securities market that are less favorable than expected; and changes in the level of capital investment, and other risks described in the company's filings with the Securities and Exchange Commission, including McCormick’s Annual Report on Form 10-K for the year ended November 30, 2016.
Actual results could differ materially from those projected in the forward-looking statements. McCormick undertakes no obligation to update or revise publicly, any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The exhibits to this report are listed in Item 7.01 above and in the Exhibit Index that follows the signature line.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
McCORMICK & COMPANY, INCORPORATED | ||
By: | /s/ Jeffery D. Schwartz | |
Jeffery D. Schwartz | ||
Vice President, General Counsel and Secretary | ||
Date: July 19, 2017
EXHIBIT INDEX
Exhibit Number | Description |
99.1 | Copy of press release entitled “McCormick to Acquire Reckitt Benckiser’s Food Division”. |
99.2 | Copy of investor presentation labeled “McCormick to Acquire Reckitt Benckiser’s Food Division”. |
FOR IMMEDIATE RELEASE
MCCORMICK TO ACQUIRE RECKITT BENCKISER’S FOOD DIVISION
McCormick Strengthens Flavor Leadership with Addition of Iconic Products, Including Frank’s
RedHot® Hot Sauce & French’s® Mustard
SPARKS, Md., – July 18, 2017 – McCormick & Company Inc. (NYSE: MKC), a global leader in flavor,
today announced that it has signed a definitive agreement to acquire Reckitt Benckiser’s Food Division
(“RB Foods”) from Reckitt Benckiser Group plc (“RB”) for $4.2 billion, subject to certain customary
purchase price adjustments.
• Addition of Frank’s RedHot Hot Sauce, French’s Mustard and other iconic, market-leading
products strengthens McCormick’s leadership in the attractive Condiments category and advances
the Company’s vision to Bring the Joy of Flavor to Life
• McCormick to advance from current position of #10 to a leading position in U.S. Condiments
category
• Acquisition provides a leadership position in the advantaged Hot Sauce Category with Frank’s
RedHot, the #1 brand in the U.S. and Canada
• Combined pro forma 2017 annual net sales are expected to be approximately $5 billion with
significant margin accretion
• McCormick will integrate RB Foods into its Consumer and Industrial segments and will retain the
brand names of French’s, Frank’s RedHot and Cattlemen’s®
“The acquisition of RB Foods strengthens McCormick’s flavor leadership with the addition of the iconic
French’s and Frank’s RedHot brands to our portfolio, which will become our number two and number
three brands, respectively,” said Lawrence E. Kurzius, Chairman, President and Chief Executive Officer.
“RB Foods’ focus on creating products with simple, high-quality ingredients makes it a perfect match for
McCormick as we continue to capitalize on the growing consumer interest in healthy, flavorful eating.
The addition of Frank’s RedHot Hot Sauce, the clear consumer favorite in an attractive and high-growth
category, French’s Mustard and the other beloved products enables McCormick to become a one-stop
shop for condiment, spice and seasoning needs, providing our customers and consumers with an even
more diverse and complete flavor product offering. RB Foods’ track record of creating market-leading
products and its dedicated state-of-the-art manufacturing facility are a strong complementary fit that we
expect will strengthen McCormick’s business opportunities as we expand our presence in condiments, a
core category for the Company in the U.S. and internationally.”
Mr. Kurzius continued, “This transaction reinforces our focus on growth, reflecting McCormick’s
commitment to making every meal and moment better and driving significant shareholder value. We have
great respect for RB Foods and the strong business its employees have built. McCormick will be able to
grow these brands in new and unique ways through our proven track record of insight-driven innovation
and the ability to leverage our global footprint. We are confident McCormick is the perfect home for RB
Foods’ popular brands and employees.”
RB Foods is a leader in the growing U.S. Condiments market, with a portfolio of iconic brands and a
loyal consumer following. Frank’s RedHot Hot Sauce, French’s Mustard, French’s Crispy Vegetables and
Cattlemen’s BBQ Sauce have all captured attractive market share positions in their respective categories.
Frank’s RedHot has a passionate consumer following and is the number one brand in its market in the U.S
and Canada, with growth outpacing the category. French’s Mustard is also number one in its category in
the U.S. and Canada.
McCormick Believes Combining These Powerful Brands Will Drive Significant Shareholder Value
• Enhance McCormick’s Scale and Increase Growth Through the Expansion of its Portfolio and
Consumer Base: McCormick anticipates that the Hot Sauce Category will continue to see robust
growth, and with insight-driven innovation and a passionate and increasing fan base, there are
significant opportunities for expansion. The Company expects McCormick’s growing global
millennial household penetration to create substantial upside for Frank’s RedHot and the other
acquired brands, increasing their respective consumer bases. McCormick also expects revenue
synergies as a result of leveraging seasonal Holiday promotions and Grilling events that include other
McCormick iconic products like Lawry’s®, Grill Mates® and our other global branded spices, herbs
and extracts.
• Drive Branded Foodservice within our Industrial Segment: In addition to retail, RB Foods’
brands have attractive positions across Hot Sauce, Mustard, Crispy Vegetable and BBQ Sauce sold
through the U.S. and Canadian Foodservice channels. We expect these products to build upon
McCormick’s Industrial segment growth by increasing the size of that segment’s Foodservice sales by
over 50% in the U.S. and Canada. French’s and Frank’s RedHot are ideal additions to McCormick’s
tabletop offering and its established products.
• Leverage our Global Scale: McCormick expects to leverage its international infrastructure, which
already includes condiment consumer insight, sales and supply chain expertise, to significantly
expand the global presence of Frank’s RedHot and French’s, which we expect will result in
substantial growth and increased household penetration.
• Realize Significant Cost Synergy Opportunities: As a result of increased scale, McCormick
expects to achieve cost synergies of approximately $50 million, the majority of which will be
achieved by 2020, with anticipated synergies split between selling, general and administrative
expenses and cost of goods sold.
• Generate Margin Expansion: With the addition of RB Foods’ business, McCormick expects to
achieve meaningful accretion to its margins and adjusted earnings per share, excluding transaction
and integration costs, and will achieve additional favorable impacts following the realization of
targeted synergies.
The transaction is expected to be completed in the third or fourth quarter of McCormick’s fiscal 2017.
The transaction is subject to customary closing conditions, including applicable regulatory approvals.
McCormick has obtained committed bridge financing and expects to permanently finance the transaction
through a combination of debt and equity.
Upon closing of the acquisition, McCormick’s leverage ratio will increase, but the Company is committed
to maintaining an investment grade credit rating and returning to its current credit profile over the longer
term. As part of this commitment, McCormick will maintain its dividend policy, curtail its share
repurchase program and will deleverage the balance sheet with anticipated strong cash flow generation.
Conference Call and Webcast
Lawrence Kurzius, Chairman, President and Chief Executive Officer and Mike Smith, McCormick’s
Executive Vice President & CFO, will host a conference call tomorrow, July 19, 2017, at 8:00 AM ET to
discuss this announcement with the financial community. The conference call can be accessed by dialing
(877) 407-8291 (U.S. / Canada) or (201) 689-8345 (International) and giving the passcode 13667123. A
replay of the call will be available until August 9, 2017, at 12:00 AM ET by dialing (877) 660-6853
(U.S./Canada) or (201) 612-7415 (International) and by entering the passcode 13667123. The webcast
and accompanying presentation of the conference call will be available on McCormick’s website
(ir.mccormick.com) prior to the start of the call.
Advisors
Credit Suisse and Cleary Gottlieb Steen & Hamilton LLP are serving as financial advisor and legal
counsel, respectively, to McCormick in connection with the transaction.
About McCormick
McCormick & Company, Incorporated is a global leader in flavor. With $4.4 billion in annual sales, the
company manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful
products to the entire food industry – retail outlets, food manufacturers and foodservice
businesses. Every day, no matter where or what you eat, you can enjoy food flavored by
McCormick. McCormick Brings the Joy of Flavor to Life™.
For more information, visit www.mccormickcorporation.com.
Forward-looking Information
Certain information contained in this release that are not statements of historical or current fact constitute
"forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934.
These statements may be identified by the use of words such as "may," "will," "expect," "should,"
"anticipate," "intend," "believe" and "plan." The forward-looking statements contained in this release
include, without limitation, statements related to: the planned acquisition of RB Foods and the timing and
financing thereof; the ability to obtain regulatory approvals and meet other closing conditions for the
planned acquisition; the expected impact of the planned acquisition, including among others, on the
company’s net sales, expected trends in net sales, earnings performance and other financial measures;
expectations regarding improved scale, growth potential in various products, geographies and market
categories, including the impact from innovation, a more diverse product offering and millennial
household penetration; expectations regarding growth in the Hot Sauce category; the realization of
anticipated cost synergies, margin expansion and adjusted earnings per share accretion from the
acquisition; the ability to retain key personnel; and the anticipated sufficiency of future cash flows to
enable the payments of interest and repayment of short- and long-term debt as well as quarterly dividends.
These and other forward-looking statements are based on management's current views and assumptions
and involve risks and uncertainties that could significantly affect expected results. Results may be
materially affected by factors such as: risks associated with acquisitions generally, such as the inability to
obtain, or delays in obtaining, required approvals under applicable anti-trust legislation and other
regulatory and third party consents and approvals; potential volatility in the capital markets and impact on
the ability to complete the proposed debt and equity financing necessary to satisfy the purchase price;
failure to retain key management and employees of RB Foods; issues or delays in the successful
integration of RB Foods’ operations with those of the Company, including incurring or experiencing
unanticipated costs and/or delays or difficulties; difficulties or delays in the successful transition of the
RB Foods’ business from the information technology systems of RB to those of McCormick as well as
risks associated with other integration or transition of the operations, systems and personnel of RB Foods,
each, as applicable, within the term of the six-month post-closing transition services agreement between
McCormick and RB; future levels of revenues being lower than expected and costs being higher than
expected; failure or inability to implement growth strategies in a timely manner; unfavorable reaction to
the acquisition by customers, competitors, suppliers and employees; conditions affecting the industry
generally; local and global political and economic conditions; conditions in the securities market that are
less favorable than expected; and changes in the level of capital investment, and other risks described in
the company's filings with the Securities and Exchange Commission, including McCormick’s Annual
Report on Form 10-K for the year ended November 30, 2016.
Actual results could differ materially from those projected in the forward-looking statements. The
company undertakes no obligation to update or revise publicly, any forward-looking statements, whether
as a result of new information, future events or otherwise, except as may be required by law.
# # #
For information contact:
Investor Relations:
Kasey Jenkins (410-771-7140 or kasey_jenkins@mccormick.com)
Corporate Communications:
Lori Robinson (410-527-6004 or lori_robinson@mccormick.com)
McCormick to Acquire
Reckitt Benckiser’s Food Division
COMBINING POWERFUL BRANDS TO MAKE EVERY MEAL AND MOMENT BETTER
ICONIC PRODUCTS TO BECOME PART OF MCCORMICK’S GLOBAL FLAVOR PORTFOLIO
TRANSACTION HIGHLIGHTS
INCREASES SIZE OF MCCORMICK’S
BRANDED FOODSERVICE SALES BY
OVER 50% IN THE U.S. AND CANADA
Significant expected synergies between RB
Foods and McCormick brands in Fast Casual
and other channels
New and improved tabletop proposition
INCREASED POTENTIAL FOR GROWTH
GLOBALLY
Acquisition will leverage McCormick’s International
infrastructure to significantly expand French’s and
Frank’s RedHot’s global presence
Goal is to expand Frank’s RedHot to No. 1 global
Hot Sauce brand
Increased household penetration and innovation in
existing markets
ONE-STOP SHOP FOR CUSTOMERS
AND CONSUMERS
McCormick will provide flavor solutions
that include condiments, as well as spices
and seasonings
Offering better-for-you products with
natural, simple ingredients
FRANK’S REDHOT ®
HOT SAUCE
No. 1 Hot Sauce in U.S and Canada
Passionate Consumer Following
FRENCH’S ®
MUSTARD
No. 1 Mustard in U.S. and Canada
Classic Americana
CATTLEMEN’S ®
BBQ SAUCE
A Leading BBQ Sauce in U.S.
Foodservice
LEADING BRANDS IN KEY FLAVOR
CATEGORIES
RB Foods’ brands have attractive positions across
Hot Sauce, Mustard, Crispy Vegetables and BBQ
Sauce categories in the U.S. and Canadian markets
Frank’s RedHot has grown faster than competing hot
sauce brands and is driving growth in the category
EXPECT TRANSACTION
WILL DRIVE SIGNIFICANT
SHAREHOLDER VALUE
AND INCREASE GROWTH
• Approx. $5 Billion
of Pro Forma 2017
Annual Net Sales
• Approx. $1 Billion
Pro Forma 2017
Adjusted EBITDA
• Meaningful Margin
Expansion
• Accretive to Adjusted
EPS
ADVANCING MCCORMICK’S VISION TO BRING THE JOY OF FLAVOR TO LIFE
Non-GAAP Financial Measures
Certain disclosures in this fact sheet represent non-GAAP financial measures which are prepared as a complement to our financial measures prepared in accordance with
United States generally accepted accounting principles (“GAAP”). As a result of the significance of this pending acquisition, the Company is modifying how we define
certain non-GAAP financial measures. We define “Adjusted EBITDA” as net income before interest, income taxes, depreciation and amortization, and as further adjusted
for cash and non-cash acquisition-related expenses (which may include the effect of the fair value adjustment of acquired inventory on cost of goods sold); and certain gains
or losses (which may include third party fees and expenses, and integration costs). The Company’s estimate of the combined revenue and Adjusted EBITDA of McCormick
and RB Foods is based only on projected financial information as of the date hereof. The Company believes that Adjusted EBITDA is useful to investors in evaluating the
Company’s operating performance and liquidity because (i) it is a widely used to measure a company’s operating performance without regard to items such as depreciation
and amortization, which can vary depending upon accounting methods and the book value of assets, (ii) it presents a meaningful measure of corporate performance exclusive
of the Company’s capital structure and is the method by which we evaluate acquisitions, and (iii) it is a widely accepted financial indicator of a company’s ability to service its
debt.
These non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior
to, GAAP results. In addition, these non-GAAP financial measures may not be comparable to similarly titled measures of other companies because other companies may
not calculate them in the same manner that we do. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and,
therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. We have not provided a reconciliation of these non-GAAP
financial measures to the related GAAP financial measures as these non-GAAP measures are solely associated with forward-looking information and such reconciliations
would require unreasonable efforts at this time to forecast and quantify certain amounts that are necessary for such reconciliation including adjustment that could be made
for matters including, but not limited to, cash and non-cash acquisition related expenses, gains and losses, both as previously described, and other charges reflected in the
Company’s reconciliation of historic amounts, the amounts of which, based on historical experience could be significant.
Forward-looking Information
Certain information contained in this fact sheet that are not statements of historical or current fact constitute “forward-looking statements” within the meaning of Section
21E of the Securities Exchange Act of 1934. These statements may be identified by the use of words such as “may,” “will,” “expect,” “should,” “anticipate,” “intend,” “believe”
and “plan.” The forward-looking statements contained in this fact sheet include, without limitation, statements related to: the planned acquisition of RB Foods and the
timing and financing thereof; the ability to obtain regulatory approvals and meet other closing conditions for the planned acquisition; the expected impact of the planned
acquisition, including among others, on the company’s net sales, expected trends in net sales and earnings performance and other financial measures; expectations regarding
improved scale, growth potential in various products, geographies and market categories, including the impact from innovation, a more diverse product offering and millennial
household penetration; expectations regarding growth in the Hot Sauce category; the realization of anticipated cost synergies, margin expansion and adjusted earnings per
share accretion from the acquisition; the ability to retain key personnel; and the anticipated sufficiency of future cash flows to enable the payments of interest and repayment
of short- and long-term debt as well as quarterly dividends.
These and other forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could significantly affect
expected results. Results may be materially affected by factors such as: risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining,
required approvals under applicable anti-trust legislation and other regulatory and third party consents and approvals; potential volatility in the capital markets and impact on
the ability to complete the proposed debt and equity financing necessary to satisfy the purchase price; failure to retain key management and employees of RB Foods; issues
or delays in the successful integration of RB Foods’ operations with those of the Company, including incurring or experiencing unanticipated costs and/or delays or difficulties;
difficulties or delays in the successful transition of the RB Foods’ business from the information technology systems of RB to those of McCormick as well as risks associated
with other integration or transition of the operations, systems and personnel of RB Foods, each, as applicable, within the term of the six-month post-closing transition
services agreement between McCormick and RB; future levels of revenues being lower than expected and costs being higher than expected; failure or inability to implement
growth strategies in a timely manner; unfavorable reaction to the acquisition by customers, competitors, suppliers and employees; conditions affecting the industry generally;
local and global political and economic conditions; conditions in the securities market that are less favorable than expected; and changes in the level of capital investment,
and other risks described in the company’s filings with the Securities and Exchange Commission, including McCormick’s Annual Report on Form 10-K for the year ended
November 30, 2016.
Actual results could differ materially from those projected in the forward-looking statements. The company undertakes no obligation to update or revise publicly, any forward-
looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
McCormick to Acquire
Reckitt Benckiser’s Food Division
Investor Presentation / July 19, 2017
Certain information contained in this presentation and our remarks that are not statements of historical or current fact constitute "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the use of words such as "may," "will," "expect,"
"should," "anticipate," "intend," "believe" and "plan." The forward-looking statements contained in this presentation and our remarks include, without limitation,
statements related to: the planned acquisition of RB Foods and the timing and financing thereof; the ability to obtain regulatory approvals and meet other closing
conditions for the planned acquisition; the expected impact of the planned acquisition, including among others, on the company’s net sales, Adjusted EBITDA and
Leverage Ratio, both as previously defined; expected trends in net sales, earnings performance and other financial measures; expectations regarding improved
scale, growth potential in various products, geographies and market categories, including the impact from innovation, a more diverse product offering and millennial
household penetration; expectations regarding growth in the Hot Sauce category; the realization of anticipated cost synergies, margin expansion and adjusted
earnings per share accretion from the acquisition; the ability to retain key personnel; and the anticipated sufficiency of future cash flows to enable the payments of
interest and repayment of short- and long-term debt as well as quarterly dividends.
These and other forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly
affect expected results. Results may be materially affected by factors such as: risks associated with acquisitions generally, such as the inability to obtain, or delays
in obtaining, required approvals under applicable anti-trust legislation and other regulatory and third party consents and approvals; potential volatility in the capital
markets and impact on the ability to complete the proposed debt and equity financing necessary to satisfy the purchase price; failure to retain key management and
employees of RB Foods; issues or delays in the successful integration of RB Foods’ operations with those of the Company, including incurring or experiencing
unanticipated costs and/or delays or difficulties; difficulties or delays in the successful transition of the RB Foods’ business from the information technology systems
of RB to those of McCormick as well as risks associated with other integration or transition of the operations, systems and personnel of RB Foods, each, as
applicable, within the term of the six-month post-closing transition services agreement between McCormick and RB; future levels of revenues being lower than
expected and costs being higher than expected; failure or inability to implement growth strategies in a timely manner; unfavorable reaction to the acquisition by
customers, competitors, suppliers and employees; conditions affecting the industry generally; local and global political and economic conditions; conditions in the
securities market that are less favorable than expected; and changes in the level of capital investment, and other risks described in the company's filings with the
Securities and Exchange Commission, including McCormick’s Annual Report on Form 10-K for the year ended November 30, 2016.
Actual results could differ materially from those projected in the forward-looking statements. The company undertakes no obligation to update or revise publicly, any
forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
Forward-looking information
2
3
OUR VISION IS
TO BRING THE
JOY OF
FLAVOR
TO LIFE
OUR MISSION
IS TO MAKE
EVERY MEAL &
MOMENT
BETTER
McCormick is the new home of Frank’s RedHot and
French’s
4
McCormick to acquire Reckitt Benckiser’s Food Division (“RB Foods”) for $4.2 billion in cash
̶ 2017E revenue of $581 million and Adj. EBITDA of $215 million
̶ Pro forma annual net sales of approximately $5 billion with significant margin accretion
Iconic, market leading brands highly complementary to McCormick’s portfolio
̶ Leadership position in high growth U.S. and Canada Hot Sauce category with #1 brand
̶ #1 market position in U.S. and Canada Mustard category
̶ French’s ® and Frank’s RedHot ® will be our #2 and #3 brands, respectively
Advancement from #10 to a leading position in U.S. Condiments
Dedicated state-of-the-art manufacturing facility in Springfield, MO
(1) McCormick’s estimate of RB Foods revenue and Adj. EBITDA for its fiscal year ending Dec. 2017.
(1)
Iconic flavor brands with leading market share
positions in desired categories
Clear leader in
on-trend category
Frank’s RedHot is the #1 Hot
Sauce in the U.S. and Canada
with a passionate consumer
following
An American icon
since 1904
#1 Mustard in the U.S. and
Canada delivering classic
flavor for generations
Strong
presence
in Foodservice
A leading Barbecue
Sauce in U.S. Foodservice
Holiday
must-have
#2 best selling food item
during Thanksgiving week
5
6
This acquisition is a momentous step in executing
the strategy presented at Investor Day
Bigger, broader
acquisition agenda
Adds significant scale in key categories and channels
Advances us from #10 to a leading position in U.S. Condiments
Frank’s RedHot and French’s are market leading brands
International opportunity to leverage our scale
Hot Sauce category is on-trend
French’s combines Classic Americana with exciting new flavors
Clean label, natural ingredients
Over-indexes with millennials
Grow healthy,
flavorful offerings
Drive growth in
Consumer and
Industrial segments
Increases our scale in U.S. and Canada Branded Foodservice
by over 50%
Significant opportunity through full portfolio offering
Leverages complementary distributor relationships
$185
$198
$215
2014 2015 2016
Growing interest in flavor
Aligned with expanding diversity in U.S. households
Millennials have a strong affinity for hot sauce
Hot Sauce is an on-trend category and Frank’s
RedHot is the clear leader
Frank’s RedHot sales growth beats category growth:
Much like our Old Bay®
fans, Frank’s RedHot
enthusiasts are deeply
passionate about the brand
Frank’s RedHot is the #1 brand in an advantaged category
7
(1) Nielsen.
Frank’s RedHot millennial index: 144
($ in millions)
No High Fructose Corn Syrup
All ingredients non-GMO
French’s Ketchup
over-indexes with millennials
The classic brand and flavor of mustard you know and love
French’s Ketchup is differentiated as a
better-for-you option
French’s is Classic Americana
Crispy Vegetables are a holiday tradition
Innovation expands crunch and
flavor to many different foods
8
Key ingredient in the #1
most Googled recipe in
2016
Relevant through
innovation
Pipeline of new products
and formats
Significant growth to our Industrial segment
Increases our scale in U.S. and Canada Branded
Foodservice by over 50%
McCormick
products
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Meaningful growth synergies
expected between RB Foods
and McCormick products in
Fast Casual and other channels
Illustrative new tabletop format
Global infrastructure to accelerate growth
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We plan to make Frank’s RedHot the #1 Hot Sauce globally
Accretive financial impact to McCormick
Value
creation
$4.2 billion transaction value implies a multiple of 19.6x 2017E Adj. EBITDA(1) or 15.9x
including anticipated run-rate synergies
Expected sales growth is in line with McCormick’s long term targets
Meaningful margin enhancement anticipated
Expected to be approximately 5% accretive(2) to McCormick’s Adj. EPS in Year 1, and
approximately 10% accretive(2) including full realization of run-rate synergies
Approximately $50 million anticipated annually, majority achieved by 2020
- Split between SG&A and COGS
Approximately $140 million in transaction and integration costs, mostly in 2017
Synergies and
one-time costs
Capital structure
Commitment to strong Investment Grade rating and returning to current credit profile
Leverage ratio of 4.9x(3), deleveraging to approximately 3x by 2020 year-end
Financing expected through new term loans, senior unsecured notes and equity
Maintain current dividend policy and curtail share repurchase program
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(1) Based on 2017E Adj. EBITDA of $215m.
(2) Pro forma EPS adjusted for transaction and integration costs, including certain purchase accounting adjustments and ongoing amortization costs.
(3) Represents net leverage based on 2017E pro forma Adj. EBITDA excluding synergies and assuming a $500M new equity issuance.
Combination of powerful flavor brands to drive
shareholder value
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Further enhances
McCormick’s scale
− Approx. $5bn pro forma
sales and $1bn pro forma
Adj. EBITDA
Iconic brands with
leading market shares
− Advances McCormick from
#10 to a leading position in
U.S. Condiments
Meaningful margin and
earnings accretion
International and
Foodservice opportunities
Certain disclosures in this presentation and our remarks represent non-GAAP financial measures which are prepared as a complement to our financial measures
prepared in accordance with United States generally accepted accounting principles (“GAAP”). As a result of the significance of this pending acquisition, the
Company is modifying how we define certain non-GAAP financial measures. We define “Adjusted EBITDA” as net income before interest, income taxes,
depreciation and amortization, and as further adjusted for cash and non-cash acquisition-related expenses (which may include the effect of the fair value adjustment
of acquired inventory on cost of goods sold); and certain gains or losses (which may include third party fees and expenses, and integration costs). We define
“Adjusted EPS” as diluted earnings per share, as adjusted for cash and non-cash acquisition-related expenses (which may include the previously described fair
value adjustment of acquired inventory and the effect of amortization of acquired intangible assets) and certain gains or losses, as previously defined, and special
charges (which may include expenses, including related impairment charges, associated with certain actions undertaken by the Company to reduce fixed costs,
simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to
require advanced approval of our Management Committee), all net of tax. The Company’s estimate of RB Foods’ Adjusted EBITDA is based only on projected
financial information available as of the date hereof. The Company’s estimate of the combined revenue and Adjusted EBITDA of McCormick and RB Foods is
based only on projected financial information as of the date hereof. The Company believes that Adjusted EBITDA is useful to investors in evaluating the Company's
operating performance and liquidity because (i) it is a widely used to measure a company's operating performance without regard to items such as depreciation and
amortization, which can vary depending upon accounting methods and the book value of assets, (ii) it presents a meaningful measure of corporate performance
exclusive of the Company's capital structure and is the method by which we evaluate acquisitions, and (iii) it is a widely accepted financial indicator of a company's
ability to service its debt. The Company believes that Adjusted EPS provides additional information that enables enhanced comparisons to prior periods and,
accordingly, facilitates the development of future projections and earnings growth prospects. Adjusted EPS is also used by management to measure the profitability
of our ongoing operations and analyze our business performance and trends.
In addition to the above non-GAAP financial measure, we define “Leverage Ratio” as net debt (which is total debt, net of cash) to Adjusted EBITDA. That ratio is a
widely-used measure of our ability to repay outstanding debt obligations and is a meaningful metric to investors in evaluating our financial leverage. Our long-term
Leverage Ratio target is 1.5 to 1.8. Our Leverage Ratio can be temporarily impacted by our acquisition activity.
These non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or
superior to, GAAP results. In addition, these non-GAAP financial measures may not be comparable to similarly titled measures of other companies because other
companies may not calculate them in the same manner that we do. We intend to continue to provide these non-GAAP financial measures as part of our future
earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. The Company provides
its 2017 expectations as to the effect of the RB Foods acquisition on a non-GAAP basis, including the non-GAAP measures previously noted. We have not provided
a reconciliation of these non-GAAP financial measures to the related GAAP financial measures as these non-GAAP measures are solely associated with forward-
looking information and such reconciliations would require unreasonable efforts at this time to forecast and quantify certain amounts that are necessary for such
reconciliation, including adjustment that could be made for matters including, but not limited to, cash and non-cash acquisition related expenses, gains and losses,
both as previously described, and other charges reflected in the Company’s reconciliation of historic amounts, the amounts of which, based on historical experience
could be significant.
Non-GAAP Financial Measures
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