McCormick Spices Up Industry With the Purchase of French-Based Ducros

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When the gavel struck, McCormick & Co. was the highest bidder in the auction for Europe’s No. 1 consumer spice maker.

The Hunt Valley-based company yesterday announced its $394 million cash purchase of the French spice giant Ducros in the auction proceeding.

“We think this a perfect fit,” said Robert J. Lawless, chairman, president and CEO of McCormick, which reported $2 billion in sales in fiscal 1999. “We paid a strong price for this, but it makes us No. 1 with only a minor dilution of earnings per share over the next two years.”

Combining McCormick, previously No. 3 in the European market, with Ducros puts McCormick at the top in France, Spain, Portugal, Belgium, Ireland and Switzerland, and gives it a solid second in several other key European countries, the company said.

McCormick already tops the list in the United States, Canada, Mexico, the United Kingdom and China. Overall, the combination will have a share of more than 20 percent in the European consumer market, the company said. McCormick reached agreement in principle to purchase Ducros, with annual sales of $250 million, from Eridania Béghin-Say. The purchase price of $394 million was based on yesterday’s value of 2.75 billion francs.

Besides spices and herbs, Ducros produces dessert-aid products. It has five manufacturing locations in France, Portugal and Albania producing products under the names of Ducros, Vahiné, Malilé and Margao.

Eridania Béghin-Say opted to sell Ducros because it did not offer appropriate synergies with the company’s other consumer products, such as sugar, olive oil and seed oils, McCormick said. The availability of Ducros was made public through the auction process.

Lawless said the acquisition — the first major purchase since 1984 — gives McCormick a platform from which to expand its business geographically as well as its line of value-added products. A number of smaller acquisitions were made from 1991 to 1993.

“For McCormick the time is right,” Lawless said. “We are buying a strategic business with a management team in place.

“I will have my fingerprints all over it,” he added. “When it’s on your watch, it’s something you want to have your hands on.”

Subject to customary regulatory approvals, the purchase is expected to be completed this summer. McCormick said it would finance the acquisition through operating cash flow, borrowings from existing credit lines and long-term debt.

Earlier this month, McCormick reported a 25 percent increase in earnings per share, excluding special charges, for the second quarter of 2000, ended May 31. Net sales for the quarter were $486 million, up 4 percent over the second quarter of 1999, while the gross profit margin increased to 35.1 percent from 33.7 percent over the prior year. Operating profit rose 16 percent, excluding special charges.

McCormick stock yesterday closed down 6 cents at $34.06. The announcement, however, was not made public until after the market closed.