Consumer goods major Unilever Plc. (UL,ULVR.L) on Tuesday confirmed that it is in advanced discussions to combine its food business with spice-maker McCormick & Co. (MKC).
In overnight trading in the U.S., Unilever shares were gaining around 1.7 percent, at $61.01, after closing Monday's regular trading 1% higher. McCormick shares were gaining 3.3 percent, at $55.49, after closing Monday's trading 1.2 percent higher.
The announcement follows recent media speculation regarding a potential strategic transaction involving elements of its Foods business, to create a new food giant valued at roughly $60 billion, including debt.
In a statement, Unilever noted that work remains ongoing to agree and finalise a deal, and it is possible that an agreement could be concluded on Tuesday, although there can be no certainty that a transaction will be agreed.
If the companies agree to a deal, it is expected to involve a combination of Unilever Foods, excluding parts of its Foods portfolio such as its business in India, with McCormick. The transaction is for an upfront cash component of approximately $15.7 billion and the majority of the consideration in McCormick equity.
Upon completion of the transaction, it is expected that Unilever and its shareholders would hold 65% of the combined company.
The transaction would be undertaken by a Reverse Morris Trust, which is intended to be tax-free for US federal income tax to Unilever and its shareholders.
The company will announce further details if a transaction is agreed.
In Mid-March, Unilever had confirmed that it has received an inbound offer for its Foods business and was in discussions with McCormick.
Unilever said it will make further announcements as appropriate.
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