McCormick & Co. Inc.MKC has announced the acquisition of Austin, TX – based One World Foods, Inc., a privately held company, for approximately $100 million in cash. The acquisition is expected to be complete by the end of Jul 2015, subject to regulatory approval.
One World Foods, Inc. is the seller of Stubb's barbeque sauces (Stubb's). It is the leading premium barbeque sauce brand in the U.S. Stubb's products also include marinades, rubs and skillet sauces. The acquisition of Stubb's will complement McCormick's range of grilling items with the addition of authentic, craft barbeque sauces. McCormick plans to grow Stubb's brand through expanded distribution, increased household penetration and innovative flavors.
McCormick expects no earnings per share impact in 2015 due to the estimated impact of transaction, integration and financing costs. However, the company expects incremental EBITDA (earnings before interest, tax, depreciation and amortization) of at least $10 million by 2017 with strong growth and significant cost synergies. The company expects annual sales from the business to be $30 million in 2015. Sales are expected to grow at a double-digit rate annually for the next several years.
McCormick has been strategically increasing its presence through acquisitions in order to expand its spices and seasonings portfolio. In the emerging markets too, the company has extended its reach where it has little or no distribution. The acquisition is McCormick’s third this year, after Drogheria & Alimentari (D&A) in May and Brand Aromatics in March.
D&A is a supplier of both brand and private label products and its addition will help in expanding the company's strong portfolio of spices and seasonings, McCormick's acquisition of New Jersey-based Brand Aromatics will aid its industrial customers as well as the USDA manufacturing facility, as it is a supplier of natural savory flavors, marinades, and broth and stock concentrates to the packaged food industry.
Besides acquisitions, McCormick regularly enhances its products through innovation to remain competitive and tap the rising demand for new flavors, spices and herbs, which are fast replacing the demand for sugar, salt and fat. McCormick is also partnering with government and trade agencies to bring healthy products as consumers increasingly turn toward fresh food items.
McCormick has a Zacks Rank #2 (Buy). Investors interested in the space can also consider General Mills, Inc. GIS, Supervalu, Inc. SVU and Post Holdings, Inc. POST. All the three companies hold a Zacks Rank #2.
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