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BofA, Credit Suisse Commit up to $4.2B in Financing to Support McCormick Acquisition of French’s Mustard

July 20, 2017, 08:00 AM

McCormick & Company Inc. announced that it has signed a definitive agreement to acquire Reckitt Benckiser's Food Division from Reckitt Benckiser Group plc for $4.2 billion, subject to certain customary purchase price adjustments.

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.

"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. 

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."

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. 

According to an SEC filing McCormick expects to finance the transaction with $3.7 billion of new debt, which will include pre-payable terms loans and senior unsecured notes issued in the capital markets, and $500 million in equity through a follow-on offering. In connection with McCormick’s entry into the Agreement, McCormick has entered into a commitment letter, dated July 18, 2017, with Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of America, N.A., Credit Suisse Securities (USA) LLC and Credit Suisse AG, pursuant to which and subject to the terms and conditions set forth therein, Bank of America and Credit Suisse have agreed to provide a senior unsecured 364-day bridge loan facility of up to $4.2 billion in the aggregate for the purpose of providing the financing necessary to fund all or a portion of the consideration to be paid pursuant to the terms of the Agreement and related fees and expenses.

Commitments under the Bridge Facility will be reduced in equivalent amounts upon any incurrence by McCormick of term loans and/or the issuance of equity or notes in a public offering or private placement prior to the consummation of the transaction and loans under the Bridge Facility will be prepaid in equivalent amounts upon the incurrence by McCormick of term loans and/or the issuance of equity or notes in a public offering or private placement and upon other specified events, in each case subject to certain exceptions set forth in the Commitment Letter.

The funding of the Bridge Facility is contingent on the satisfaction of certain customary conditions set forth in the Commitment Letter, including (i) the execution and delivery of definitive documentation with respect to the Bridge Facility in accordance with the terms sets forth in the Commitment Letter, and (ii) the consummation of the transaction in accordance with the Agreement.
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.
Credit Suisse and Cleary Gottlieb Steen & Hamilton LLP are serving as financial advisor and legal counsel, respectively, to McCormick in connection with the transaction.


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