McCormick Acquires FONA International, LLC
"FONA is well known in the market, in part because of its strong customer engagement platform, talented employees and investments in its future, which have driven growth for both FONA and its customers."
FONA's annual sales are approximately
McCormick Anticipates the Acquisition of FONA Will Drive Long-Term Shareholder Value
- Broadens Product Offering and Accelerates Flavor Growth: FONA's diverse portfolio of flavors, including flavors for health and performance nutrition applications, broadens McCormick's value-add offerings with products that are highly complementary to its existing portfolio. By combining the portfolios and infrastructures, McCormick adds manufacturing capacity as well as greater scale and expects to accelerate its global flavor growth.
- Expands Capabilities and Technology Platform: McCormick is augmenting its capabilities with FONA's highly experienced research and development team and extending its technology platform with additional proprietary encapsulation methods. These expand McCormick's innovation capabilities, particularly with the added expertise in flavoring health and performance nutrition products across a variety of applications. FONA's strong market position in this area advances McCormick's health and wellness portfolio.
- Strengthens Clean and Natural Leadership: McCormick's clean and natural platform is meaningfully enhanced with the addition of FONA's predominantly natural portfolio. McCormick is increasing its talent bench strength further enabling better-for-you flavor product development wins and strengthening its clean and natural leadership position.
- Enhances Customer Intimacy and Partnerships: FONA brings an industry leading customer engagement platform. The combination of McCormick and FONA's complementary global and mid-tier customers, insight capabilities and customer intimacy approaches, enhances McCormick's customer value proposition. The Company is well positioned to reach a broader customer base, deepen existing customer relationships by cross-selling and establish inroads with new customers while driving innovation.
- Accretive to Gross Margin: The addition of FONA's business is expected to be accretive to McCormick's gross margin. The Company also anticipates driving further margin expansion by achieving robust sales growth and further migrating the Flavor Solutions portfolio to more value-added and technically insulated products. McCormick also expects the transaction to be neutral to adjusted earnings per share in 2021 and accretive in 2022, excluding transaction and integration costs.
McCormick has purchased 100% of FONA for
While this transaction will increase McCormick's net-debt-to-adjusted EBITDA ratio, the Company is committed to a strong investment grade credit rating, paying down debt with anticipated strong cash flow generation and maintaining its dividend policy.
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Certain information contained in this press release that are not statements of historical or current fact constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the use of words such as "may," "will," "expect," "should," "anticipate," "intend," "believe" and "plan." The forward-looking statements contained in this press release include, without limitation, statements related to: the expected impact of the acquisition of FONA, including among others, on McCormick's net sales, expected trends in net sales and earnings performance and other financial measures; expectations regarding improved scale, growth potential in our flavor platform, including the impact from a broadened product offering, expanded technological capabilities, clean and natural leadership, and enhanced customer partnerships; expectations regarding acceleration of growth in the flavors category; expectations regarding the acceleration of strategic migration of the portfolio; the realization of anticipated cost synergies, margin expansion and adjusted earnings per share accretion from the acquisition; the ability to create shareholder value through acquisitions; the impact of COVID-19 on FONA's business, supply chain, suppliers, consumers, customers and employees; the ability to retain key personnel; and the anticipated sufficiency of future cash flows to enable the payments of interest and repayment of short- and long-term debt as well as quarterly dividends and the ability to issue additional debt or equity securities.
These and other forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by factors such as: risks associated with acquisitions generally, such as the failure to retain key employees of FONA; issues or delays in the successful integration of FONA's operations with those of McCormick, including incurring or experiencing unanticipated costs and/or delays or difficulties; difficulties or delays in the successful integration of FONA's business as well as risks associated with the integration of the operations, systems and personnel of FONA; future levels of revenues being lower than expected and costs being higher than expected; failure or inability to implement growth strategies in a timely manner; unfavorable reaction to the acquisition by customers, competitors, suppliers and employees; conditions affecting the industry generally; local and global political and economic conditions; unexpected events or public health crises, including the ongoing effects of COVID-19; the effects of the increased levels of debt service following the FONA acquisition, as well as our other recent acquisition, as well as the effects that such increased debt service may have on McCormick's ability to borrow or the cost of such additional borrowing, our credit rating and our ability to react to certain economic and industry conditions; and other risks described in the company's filings with the
Actual results could differ materially from those projected in the forward-looking statements. The company undertakes no obligation to update or revise publicly, any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
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