It was announced recently that McCormick, the US food company will be trying to take a 76.5% controlling interest in Unilever Pakistan foods limited.

This is on the back of a merger between McCormick, the US food company, and Unilever Foods. An accompanying consideration is the deal excludes the food division for Unilever in India. Selling the food division has been an ongoing consideration from the company as its management has strategized to focus more on higher growth segments in Home & Personal Care (HPC) and not on the foods divisions which has seen lagging growth especially in high income segments of North America and Europe which has seen change in consumer habits; movement away from ultra processed foods, private labels increasing market share and weight loss drugs. This sale has been a long time since it has been a long time with activist pressure from investors like Nelson Peltz.

This is the exact reason that the deal omits the Indian section of the business as it is still a high growth segment generating just shy of $1.6bn for Unilever India, which is around 22% of its revenue.

$44 Billion

McCormick has been active in the M&A market for a number of years as it has continued to purchase assets that complement its vertical supply chain or enhances its product portfolio. Some of the more notable transactions in the past decade have been:

• Gourmet Garden - April 2016

• Kohinoor Specialty Food - April 2017

• French & Frank' Redhot - July 2017

• Fona International - December 2020

• Cholula - November 2020

• Jurado - March 2025

These transactions have little in common with the majority stakeholder purchase of Unilever Foods Pakistan. The portfolio of Unilever Foods in Pakistan is not that vast with 4 brands:

• Hellmans

• Knorr

• Rafhan

• Glaxose-D

Part of the reason for the transaction seems to be driven towards expanding the product mix in Pakistan and taking advantage of some changing dynamics pertaining to consumer purchases on food items. In part II we research the market dynamics for Unilever, the ownership structure and how McCormick might purchase the shares and who from and what it means for investors on the PSX.

The deal between McCormick and Unilever is valued at $44bn and the combined entity is responsible for $20bn in sales and Unilever shareholders will keep 65% of the ownership, but the transaction for the Pakistani part of the business is not full ownership.

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