Unilever Strikes $65 Billion Deal to Combine Food Unit with McCormick

The companies said the agreement will be structured as a Reverse Morris Trust, a tax-efficient mechanism often used in major corporate separations and mergers. Under the arrangement, Unilever will spin off its food division before combining it with McCormick, which owns brands such as Cholula hot sauce. Per Reuters, this marks the largest Reverse Morris Trust transaction involving a European company to date.

Following completion, Unilever and its shareholders will hold a 65% stake in the newly formed entity. That stake is valued at roughly $29.1 billion based on McCormick’s recent average share price, according to Reuters. In addition, Unilever will receive $15.7 billion in cash as part of the deal. The companies estimate the transaction values Unilever’s food unit at nearly $45 billion and McCormick at about $21 billion.

The move represents a major strategic shift under CEO Fernando Fernandez, who took over leadership in March 2025. According to Reuters, the deal follows last year’s spin-off of Unilever’s ice cream division, which included brands such as Ben & Jerry’s and Magnum. The latest transaction is widely seen as an effort to streamline the company’s portfolio and focus on faster-growing segments.

“There is logic in a disposal of the foods business where volumes have been muted over the past years,” said Harsharan Mann, a portfolio manager at Aviva Investors, in comments sent to Reuters. He added that the Reverse Morris Trust structure is “sensible” given tax challenges that have affected similar deals. Mann also noted that “Global peers such as Procter & Gamble have successfully used this structure in prior years for disposals of non-core businesses in a tax-free structure.”

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The agreement excludes certain assets, including Unilever’s operations in India. The company’s food division includes well-known brands such as Hellmann’s mayonnaise and Knorr stock cubes, part of a broader portfolio that spans personal care, home cleaning, and beauty products.

Despite being a high-margin segment, Unilever’s food business has struggled with slower sales growth compared to its personal care and beauty units. According to Reuters, this underperformance has hindered the company’s goal of achieving annual sales growth of 4% to 6%.

Investor pressure to divest the food segment has been building for several years. Reuters reported that activist investor Nelson Peltz acquired a stake in the company in 2022, contributing to calls for a more streamlined business structure. Peltz has also been linked to leadership changes, including the departures of former CEOs Alan Jope and Hein Schumacher.

The merger comes alongside ongoing cost-cutting measures at Unilever, which aims to save around 800 million euros over three years. Per Reuters, the company has also implemented a global hiring freeze lasting at least three months, citing geopolitical tensions in the Middle East.

Unilever’s roots in the food industry date back to the 19th century, when one of its founding Dutch families built a butter trading business. The modern company was formed in 1929 through the merger of Margarine Unie and Lever Brothers. Today, its food division accounts for just over a quarter of its annual sales, which totaled 50.5 billion euros last year, and employs a significant portion of its global workforce.

Source: Reuters