Print | Share | Reprint

McCormick gulps down Wuhan

by Thomas Zadvydas | Published August 20, 2012 at 4:15 PM

Food spices and flavorings maker McCormick & Co. announced Monday, Aug. 20, that it has agreed to acquire Chinese bouillon producer Wuhan Asia-Pacific Condiments Co. Ltd. for 900 million renminbi ($141 million).

China-based Wuhan Asia-Pacific was founded in 1998, employs 900 people and has about $115 million in annual sales. It makes the DaQiao and ChuShiLe brand bouillon products.

McCormick said it took the target out at about 12 times Ebitda. The deal is expected to be dilutive to earnings per share in 2013 from $4 million in integration and financing costs, slightly accretive in 2014, and fully accretive by 2015.

"The addition of WAPC, extends our broad range of flavors in China with bouillon," McCormick president, CEO and chairman Alan Wilson said in a statement. "In WAPC's top markets, more than half of consumers use chicken bouillon each day at every meal to enhance the flavor of their food. This business is strong in central China, which fits well with McCormick's presence in the coastal regions."

The deal should close in mid-2013, pending regulatory approvals, including antitrust clearance.

Sparks, Md.-based McCormick, a 123-year-old spicemaker, continues a push into developing international markets through Monday's deal.

"With the addition of WAPC's business and acquisitions completed in the past 12 months, we expect approximately 15% of 2013 sales to come from emerging markets, a significant increase from 10% in 2011. We are well on our way toward achieving our 2015 goal to have 20% of sales in emerging markets," Wilson added in the release.

Like many other multinational corporations, McCormick is looking to capitalize on the expanding middle class in developing countries such as India and China.

"These are emerging markets which have populations that are starting to move from lower income to middle income, and who have a real interest in improving their quality of life. That means more spices and seasonings," said analyst Bentley Offutt of Offutt Securities Inc. "McCormick has [also] repositioned itself well in European countries."

To illustrate this trend, McCormick made two significant deals last June. It formed a joint venture with Indian food company Kohinoor Foods Ltd. called Kohinoor Specialty Foods India Private Ltd. McCormick invested $115 million for an 85% stake in the joint venture; Kohinoor distributes food products such as rice. The same month, McCormick bought Polish peer Kamis SA for 830 million zloty ($291 million).

A McCormick spokesman declined comment on the Wuhan Asia-Pacific deal. Wuhan Asia-Pacific could not be reached.

McCormick shares were up 21 cents, or 0.35%, to $60.33, Monday afternoon on the New York Stock Exchange, giving the company a market value of $8 billion.

Share:

Consumer & Retail

McCormick gulps down Wuhan

Free preview

Meet the journalists

Thomas Zadvydas

Reporter: Middle Market

Movers & Shakers

Video

The Deal interview: Bob Landis

Sectors