McCormick bets $15.7B on Unilever foods to triple revenue base

McCormick & Company's $15.7 billion bet on Unilever's food business would create a $20 billion global food giant — if the company can manage the debt.

McCormick & Company agreed to pay $15.7 billion in cash for Unilever's food business, a deal that would triple the spice maker's annual revenue to more than $20 billion while pushing its leverage ratio to 4x EBITDA.

"Plans are in place to drive leverage below the targeted 3x level within two years," McCormick's management said during the company's second-quarter earnings call, citing expected cost savings from back-end consolidation and supply chain integration.

The transaction, one of the largest in the packaged food sector this year, would add brands including Knorr and Hellmann's to McCormick's portfolio. The company's shares trade at roughly 8.6 times earnings, a deep discount to their historical mid-20x range, after falling about 50 percent from record highs. Adjusted gross margin improved 270 basis points in the most recent quarter, while adjusted operating margin gained 180 basis points.

The deal comes as global M&A activity surges 41 percent in the first five months of 2026, driven by 74 megadeals exceeding $10 billion, according to Dealogic data cited by Bain & Co. For McCormick, success hinges on integrating two large businesses while reducing debt — a challenge that has weighed on the stock even as the dividend yield has climbed to nearly 4 percent.

The $15.7 billion cash consideration will be funded through cash on hand and new debt, lifting McCormick's leverage to 4x EBITDA — above the 3x threshold typically considered comfortable for investment-grade companies. The company carries investment-grade ratings from all major agencies and has committed to reducing leverage below 3x within two years, executives said.

McCormick's second-quarter results showed the underlying business remains healthy even without the deal. Revenue rose 16.7 percent, including 1.7 percent organic growth driven by a 2.2 percent increase in average prices. Adjusted earnings per share reached 80 cents, up 11 cents from a year earlier and 16 percent above consensus estimates.

Revenue to Triple to $20B on Unilever Deal

The combination would dramatically expand McCormick's geographic footprint. While the company's consumer segment has struggled with weaker volumes in the Americas as shoppers trade down to private-label products, its Europe, Middle East, Africa, and Asia-Pacific businesses have posted modest organic growth. Adding Unilever's food brands would give McCormick a presence in markets where it currently has limited distribution.

The combined entity is expected to generate more than $20 billion in annual sales, making it one of the largest pure-play consumer food companies globally. McCormick believes the acquisition will begin contributing to adjusted earnings within the first year after closing, with benefits increasing as integration synergies are realized.

Valuation at 8.6x Earnings Creates a Floor

At roughly $51.50 per share, McCormick trades at about 8.6 times trailing earnings — a valuation that reflects investor concerns about the added debt and execution risk. The stock's typical multiple of 25x to 30x earnings suggests significant upside if the integration proceeds as planned.

Institutional investors own nearly 80 percent of the stock and have resumed accumulation in the second quarter at an aggressive pace, according to shareholder data. The dividend, increased annually for 38 consecutive years, yields approximately 3.7 percent.

This article is for informational purposes only and does not constitute investment advice.