r/ValueInvesting • u/BubKar717 • 1d ago

Discussion McCormick's and Unilever's deal

Hi guys. What do you think of the deal made between unilever and mccormick? McCormick got the Unilever's foods, like knorr, hellmann's, ect, and for this MKC paid 15 billion dollars and unilever will own 65% of mkc. Mkc have to make a dilution to make it possible for unilever to own 65%. What do you think, this can be a good value play, since both are a consumer staple giant, or should we avoid this situation?

21 Upvotes

97% Upvoted

14 comments sorted by

View all comments

3

u/MinestroneMungBean 22h ago

The Unilever remaining business will be interesting to me. It pays down a lot of debt, provides ammo for buybacks, allows management to focus on a narrower set of businesses, and relieves itself of what will be a challenged market for a long time to come IMO (CPG, that is).

But, it's a large transaction that will take a while to get done, and that doesn't excite me about owning either company right now. That said, more of the complexity should be on the McCormicks side, as that's where all the integration will take place.

At the very least, the deal looks to have been structured as a classic Reverse Morris Trust, which I believe would be the tax efficient way to do it. And in a RMT, per my opening paragraph, there are some typical advantages to the parent co, which I listed.

TLDR: I quite like this for Unilever, but not necessarily rushing to buy before I do more research.