McCormick & Company Inc. announced today that it has purchased 100% of the shares of FONA International and certain affiliates for $710 million in cash. FONA’s annual sales amount to approximately $114 million.
McCormick (MKC) manufactures, markets and distributes spices, seasoning mixes, condiments and other flavor enhancing products to the entire food industry across 160 countries and territories. Founded in 1889, the company produces over $5 billion in annual sales and is the self-proclaimed ‘global leader in flavor’.
Founded more than 30 years ago, FONA creates and produces clean and natural flavors for a diverse customer base and some of the largest food, beverage, and nutritional companies in the world. FONA uses cutting edge technology and personalized customer care services to offer a unique value proposition to the flavor industry.
Lawrence E. Kurzius, Chairman, President and Chief Executive Officer, said, “The acquisition of FONA reinforces McCormick’s global growth strategy as FONA expands the breadth of our flavor solutions segment into attractive categories, as well as extends our technology platform and strengthens our capabilities.”
Kurzius added, “FONA’s portfolio is highly complementary to McCormick’s and will provide our customers with an even more comprehensive product offering to meet the growing demand for clean and flavorful eating, drinking and nutrition experiences.”
McCormick will finance the $710 million acquisition with a combination of cash and commercial debt. The company is committed to maintaining its strong investment grade credit rating and is confident that it will pay down the increased debt ratios with strong cash flow generation.
McCormick is also committed to maintaining its dividend policy. (See MKC stock analysis on TipRanks)
Jefferies analyst Robert Dickerson assigned a Hold rating on the stock on December 13 and set a price target of $95. This implies that McCormick shares are fully priced at current levels.
Dickerson lowered his fourth quarter EPS estimate to $0.78, which is slightly lower than the Street’s forecast of $0.81.
Overall, consensus among analysts is a Hold based on 4 Hold ratings. The average price target of $93.25 suggests downside potential of around 2% over the next 12 months.
MKC shares have gained around 12% in value so far this year.
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