McCormick & Co. Inc. MKC has announced that it has completed the acquisition of 100% of the shares of Drogheria & Alimentari (D&A), a privately held company based in Italy, for a purchase price of €72 million ($79 million), subject to certain closing adjustments. The acquisition was announced on Feb 20, 2015.
McCormick expects no earnings per share impact in 2015 due to the estimated impact of transaction and integration costs. In 2016, McCormick expects the acquisition to be fully accretive.
As a supplier of both brand and private label products, D&A holds approximately one-third of the spice and seasoning category in Italy and exports its products to 60 other countries. This complements McCormick's strong brands across Europe. The addition of D&A will also help in expanding the company's strong portfolio of spices and seasonings. Further, McCormick expects to grow annual sales of D&A products at a mid-single digit rate.
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.
McCormick's recent acquisition of New Jersey-based Brand Aromatics (in March) will aid McCormick’s 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. (Read: McCormick to Acquire Brand Aromatics, Expand Portfolio).
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.
The company also remains optimistic on its pricing actions and cost savings initiatives. However, McCormick remains apprehensive about higher material costs, which led the company to lower its earnings guidance for 2015. (Read: McCormick Beats Earnings Estimates in Q1 on Higher Sales).
McCormick has a Zacks Rank #2 (Buy). Investors interested in the space can also consider B&G Foods, Inc. BGS, The J. M. Smucker Co., Inc. SJM and Flower Foods, Inc. FLO. All of them carry a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment