McCormick nears deal to buy top rival

No. 1 spice maker confirms it seeks to purchase No. 2

Target is France's Ducros

Purchase expected to raise its sales in Europe by 70%

Acquisitions

June 24, 2000|By Kristine Henry | Kristine Henry,SUN STAFF

McCormick & Co. Inc., the world's largest spice maker, said yesterday that it is in the "well-advanced stage" of negotiations to buy the world's second-largest spice producer and significantly increase the Sparks-based company's sales in Europe.

Ducros, with headquarters in France, makes spices, seasonings and dessert aids, such as toppings for ice cream. It had net sales in 1999 of nearly $250 million. If the deal goes through, McCormick's sales in Europe, which were $347 million last year, would increase by about 70 percent.

The announcement came after the pending deal was reported in the European press.

"We're excited about the opportunity before us, but we're cautious to say a deal has not been struck between the two companies," Robert J. Lawless, McCormick's chairman, president and chief executive, said yesterday.

Ducros is attractive to McCormick because "it's in our core business, it's a geographic area we have expressed interest in over many years and it's the same type of business we have in Europe," Lawless said. He declined to discuss any terms of the negotiations.

McCormick's last major acquisition occurred in 1984 when it bought Paterson Jenks for $54 million. That deal brought McCormick the Schwartz brand, the No. 1 selling spice line in the United Kingdom.

Analysts have long said McCormick needs to get more aggressive about buying companies and expanding its reach.

"From a strategic point of view this should be a very good acquisition in that it would allow McCormick a much better presence in Europe," said Kurt Funderburg, who follows McCormick for Ferris, Baker Watts Inc. in Baltimore.

"The only big question in my mind is what they're going to pay for it," he said.

"Obviously in acquisitions there's always the chance you're going to overpay for what you're buying, or that you do something that could, even if you're not overpaying from a long-term perspective, dilute your earnings in the short term."

Lawless said he could not comment on what the sale would mean for McCormick's bottom line, adding that he would do so when and if there is a deal.

McCormick had record sales last year of $2 billion and a profit of $103.3 million.

It was in a market-share war with a rival spice maker, Burns Philp, in the mid- and late 1990s that took up much of the company's focus. Having won that "war," as it's called inside McCormick, the company is moving more toward expanding its product lines and broadening its worldwide presence.

According to its Web site, Ducros, a subsidiary of France's Eridania Beghin-Say, employs 850 and has production sites in France, Portugal, Spain and Albania.

"McCormick has a lot of holes in its international portfolio and this would fill one and make them more of a global player," said John M. McMillin, an analyst at Prudential Securities in New York. "But [the deal] is hard to analyze until you know what it costs them."

Shares of McCormick rose 37.5 cents to $34.1875 yesterday on the New York Stock Exchange.

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