Investors change tune on McCormick

March 23, 1995|By Kim Clark | Kim Clark,Sun Staff Writer

Investors who may have been too pessimistic last fall about McCormick & Co. Inc.'s operating prospects have pushed the company's stock price to a 52-week high in a 10-week bullish stampede.

McCormick's stock closed yesterday at $23.125, unchanged from Tuesday's high. The stock has gained $5, or 27.6 percent, since the first of the year.

Investors and analysts said that McCormick's stock has more than made up for an eight-month decline that started when the company reduced its earnings estimates in July.

The advance began in early January, when Grand Met PLC announced it would buy Pet Inc., a food company, thus sparking a frenzy of takeover speculation in the food industry.

A Wall Street newsletter published last week said that rumors that McCormick was a takeover target also helped push its stock price up in recent weeks.

Greg Zuckerman, a writer for Mergers & Acquisitions, said yesterday that some traders believed Unilever NV or CPC International (the company that owns Hellmann's brand mayonnaise) would bid for McCormick.

But most of those rumors have been doused because McCormick's corporate bylaws make it very difficult for an outsider to take over the company.

In addition, CPC several years ago signed a "stand-still" agreement and promised not to buy McCormick.

Mr. Zuckerman said Wall Street traders believe that McCormick executives and members of the founding family, who together hold a controlling one-third share of the company's stock, won't sell unless they are offered between $50 and $60 a share -- more than twice today's selling price.

McCormick executives yesterday declined to comment on whether there was a price at which the insiders would sell but again insisted they plan to keep the company independent.

"We continue to maintain our fierce desire to remain independent," said company spokesman Allen C. Barrett.

He said that the company has long felt that investors were overly bearish and that it now thinks they have finally begun to value the company correctly.

He declined also to say what price executives feel would be fair for McCormick shares. But as recently as three years ago, the company's shares were trading in the low $30s.

Eric McKissack, who manages a fund with 1.9 million McCormick shares for Ariel Capital Management in Chicago, said that he's delighted with the recent increase because he bought most of his shares at prices between $18 and $22.

The takeover rumors have been squelched but made many investors realize that McCormick shares were undervalued, he said.

Many investors sold shares when McCormick announced it couldn't keep up its double-digit profit growth rate this summer.

Mr. McKissack said he had complained to company executives that their continuing insistence that McCormick will increase its earnings per share by 15 percent a year "over time" may be causing skepticism among other investors.

The company probably won't achieve that this year, but Mr. McKissack said he and many other investors don't mind. The company's profits, while no longer spectacular, are still good, he said.

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