London | Reuters — The sale of Reckitt Benckiser Group’s North American food business, which could fetch more than US$3 billion, has kicked off with information packages going out to industry players, according to sources familiar with the matter.
The sale of the food business is aimed at helping the British consumer goods company pay down debt from its planned US$16.6 billion purchase of U.S. infant nutrition firm Mead Johnson.
Parties that may be interested in the unit, home to French’s mustard and Frank’s RedHot sauce, include McCormick, Conagra Brands, Unilever, Hormel Foods, Pinnacle Foods and Campbell Soup, according to the sources, who declined to be identified as the matter is private.
Reckitt declined to comment, as did Morgan Stanley, which sources say is advising it.
Conagra, Unilever, Hormel, Pinnacle and Campbell Soup declined to comment. A spokeswoman for McCormick was not immediately available.
Reckitt, which also makes Scholl footcare products and Nurofen tablets, is not courting private equity firms, said the sources, given the strong initial interest from industry players, which are usually able to pay more due to synergies with their existing businesses.
Private equity firms are under pressure to spend the large piles of cash they have amassed, but the sources said they would be unlikely to match any bids from the other companies, which also sell packaged foods.
The business had 411 million pounds (C$715 million) of revenue last year, with like-for-like growth of five per cent, according to Reckitt’s annual report, which also said the unit’s operating margin shrank by 50 basis points last year to 28.7 per cent due to investments aimed at growing it and expanding internationally, most notably in Canada.
Reckitt’s French’s condiment business has recently made a splash in Canada promoting its use of Canadian-grown tomatoes and an Ontario bottling plant for all ketchup it sells in the Canadian market, followed by similar promotion for its use of Canadian-grown mustard.
Ketchup origin became an issue among some Canadian consumers after Kraft Heinz shed its Leamington, Ont. tomato processing plant in 2014.
Canadian burger and root beer chain A+W last year announced a supply deal with French’s for ketchup and mustard, citing the company’s use of “locally-sourced tomatoes from Leamington, Ont. and mustard seeds from Saskatchewan in all of its ketchup and mustard.”
First-round bids for the Reckitt Benckiser food business are expected in coming weeks, said one of the sources.
— Martinne Geller is a Reuters correspondent covering the EU consumer goods sector from London. Additional reporting for Reuters by Lauren Hirsch in New York and Pamela Barbaglia in London. Includes files from AGCanada.com Network staff.
Tagged Frank's RedHot, French's, ketchup, Morgan Stanley, Mustard, private equity, Reckitt Benckiser