Jim Armitage: Reckitt Benckiser's food deal cuts the mustard
Reckitt’s sale of its French’s mustard division to McCormick will bring much-welcome fee trouserings for Morgan Stanley and Robey Warshaw.
As Goldman Sachs’ reduced investment banking numbers hinted yesterday, multi-billion dollar deals in London have been thin on the ground as investors fret about the outlook for the UK.
Offers that have come in have often failed, McCormick’s bid last year for Premier Foods being a case in point.
But this latest effort from the US spices group seems generous, valuing the target at 25 times its underlying profit compared with Reckitt’s broader multiple of 20. That’s nearly twice as high as the valuation McCormick was offering Premier and makes it unsurprising Unilever and Hormel chose to walk away.
That’s not to say Reckitt has made up for the mistake of buying baby milk maker Mead, a potentially destructive pivot away from its supposed focus on over-the-counter medicines.
But it’s a good deal nonetheless.
Incidentally, McCormick might have felt it could afford the luxury of a bigger price today having dodged a bullet with Premier. It was rebuffed at 65p a share last year.
Today, having hit 55p in October, the Kipling cakemaker is floundering at 40p. An exceedingly close escape.
