McCormick Urges Shareholders To Reject TRC Capital’s Tender Offer

McCormick & Company has recommended that its shareholders reject the mini-tender offer from Canadian investment firm TRC Capital Investment Corporation. The spices and condiments maker has received the offer to buy 750,000 McCormick shares directly from investors at a 4.46% discount.

McCormick (MKC) said that it “is not associated with TRC Capital or TRC Capital’s unsolicited offer and recommends that stockholders do not tender their shares. McCormick does not endorse TRC Capital’s offer because it is at a price below the current market price for McCormick’s shares and, as a mini-tender offer, it does not provide investors with the same level of protections as provided by larger tender offers under U.S. federal securities laws.”

Earlier this week, McCormick agreed to acquire hot sauce maker Cholula from private equity firm L Catterton for $800 million in cash. The deal is expected to close by the end of 2020, and will be financed with a combination of cash and commercial paper. McCormick anticipates the transaction to be accretive to adjusted earnings per share in 2021. (See MKC stock analysis on TipRanks)

Following the Cholula deal, Stifel Nicolaus analyst Christopher Growe maintained a Hold rating and a price target of $177 (4.6% downside potential) on the stock. Growe said in a note to investors that the company gets “another leading hot sauce brand to its portfolio” with Cholula. He sees it as a strategic acquisition, and expects McCormick to execute its “playbook” to boost sales and margins for the brand. 

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 2 Buys and 4 Holds. The average price target stands at $192.67 and implies upside potential of about 3.8% to current levels. Shares have risen by 9.3% year-to-date.

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