Last week, McCormick & Company announced it would be adding French’s mustard and Frank’s Hot sauce to its broad portfolio. The spice maker agreed to buy the British consumer-goods brands for $4.2 billion.
The deal is expected to be complete by the end of November and prior to that it must get regulatory approval.
“The addition of Frank's RedHot Hot Sauce, the clear consumer favorite in an attractive and high-growth category, French's Mustard and the other beloved products enables McCormick to become a one-stop shop for condiment, spice and seasoning needs, providing our customers and consumers with an even more diverse and complete flavor product offering,” said Lawrence E. Kurzius, Chairman, President and Chief Executive Officer in a press release. “McCormick will be able to grow these brands in new and unique ways through our proven track record of insight-driven innovation and the ability to leverage our global footprint. We are confident McCormick is the perfect home for RB Foods' popular brands and employees."
However, Wall Street investors were quick to claim that the $ 4.2 billion was much too high of a price tag.
Earlier in the year, there was speculation that Reckitt Benckiser (the company that owns French’s and Frank’s Red Hot) was looking to sell the brands for around $3 billion.
But Kurzius said that these former reports were based on false information.
“The price that was floated was never in the cards -- that speculation was not well-informed,” said Kurzius to “Bloomberg.” “It was unfortunate that that was out there, but I’m really comfortable with what we paid.”
Wall Street’s opinion still made an impact on the McCormick shares. Following the announcement, the spice company’s shares dropped 5.2% the next day.
Kurzius wasn’t too worried about this either.
“Sometimes the market reacts in ways you don’t fully expect,” said Kurzius to “Bloomberg.”“If I got a chip on my shoulder every time the stock went down, I’d be carrying a log on my back.”
Reckitt Benckiser recently has focused on investing in consumer health products. This seems like another move to distant itself from the food business.