Spice maker set to grow

McCormick adds to Lawry's line

August 02, 2008|By Andrea K. Walker | Andrea K. Walker,Sun reporter

Spice maker McCormick & Co. will soon expand capacity at its Hunt Valley plant as it prepares to begin manufacturing Lawry's seasonings and Adolph's marinades.

The Sparks company said yesterday that it had completed the $604 million acquisition of Lawry's from a division of Unilever. It was the biggest acquisition in McCormick's history.

Company officials said the deal would immediately add to earnings, but wouldn't have a significant impact on the number of employees.

"We see a number of opportunities to grow a business that we believe has been underserved in recent years," Alan D. Wilson, McCormick president and chief executive officer, said in a conference call with analysts yesterday.

McCormick had been pursuing Lawry's for at least a decade.

"This has been on our list for a long time," Wilson said later in a phone interview. "This is the single best acquisition we could have made in North America in our category from a scale perspective."

Wilson said the company would make a capital investment to increase manufacturing capacity in Hunt Valley and other locations.

The company said it expects the acquisition, which does not include employees and manufacturing facilities, to increases sales by 4 percent and add 8 to cents a share to earnings in the first year. It also increased sales growth estimates for this year to 9 percent to 10 percent and earnings per share guidance by 6 cents per share.

Because of competitive concerns, the Federal Trade Commission required McCormick to sell its Season-All division. The company sold the business to Morton International for $15 million in cash. It expects a $12 million gain from the deal.

The gain on the sale of Season-All will be offset in part by a $5 million pretax loss that relates to the rebalancing of McCormick's current debt structure with the new debt from the acquisition, the company said.

Wilson said he hopes to increase Lawry's sales through better marketing and the creation of new products. About 65 percent of Lawry's sales are seasoning blends sold under the Lawry's and Adolph's names at grocery stores and other retail outlets. Another 23 percent are wet marinades, while the remaining sales are to food service customers.

Wilson said that some of Lawry's products aren't as well-known on the East Coast. He said there is room for growth in the marinade and seasoning market because the sluggish economy has caused people to prepare more meals at home. For instance, people are buying more tenderizers as they cook lower grades of meats.

"We see this as a potential for growth even in the kind of economy we have now," Wilson said. "We think we can help provide solutions for consumers."

Shares of McCormick closed yesterday at $39.83, down 27 cents.


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