Key insights
- RBC Capital expresses skepticism about Unilever's proposed food portfolio reshuffle with McCormick, citing concerns over the deal structure, lack of a clean exit, and minimal control premium. The analyst firm maintains an Underperform rating on Unilever, viewing the transaction as creating a complex and less focused food operation. This could indirectly affect US-listed competitors if Unilever's strategic shift impacts the competitive landscape.
Investing.com -- RBC Capital is skeptical of Unilever’s planned overhaul of its food portfolio, warning that the proposed transaction with McCormick raises more questions than it answers.
The firm, which rates the shares at Underperform with a 4,200p price target, said it is “not overly impressed” by what has been outlined so far.
Unilever indicated that a deal could include an upfront component of $15.7bn in cash, with the rest in McCormick equity, leaving the company with a 65% stake in the new entity.
That structure “would hardly be a clean exit,” analyst James Edwardes Jones wrote.
Excluding the India foods unit, which is estimated at 11% of the business, RBC Capital said brands such as Hellmann’s and Knorr represent roughly two-thirds of the division’s value.
The concern, analysts said, is that Unilever appears to be moving from “full ownership of one dominated by just two brands” to partial ownership of a far less focused business. “That doesn’t sound terribly appealing to us,” RBC Capital wrote.
A later update from the firm said the deal terms are “much as foreshadowed,” with Unilever’s 65% stake split between shareholders and the company, alongside €6bn in planned buybacks through 2029 and $600 million in synergies.
Still, RBC Capital remains “unimpressed,” adding that the transaction shows “minimal control premium” and leaves shareholders with a complex, sprawling food operation.