Latest / Bloomberg Intelligence / Unilever Food Arm to Join McCormick in $44.8 Billion Deal

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Unilever Food Arm to Join McCormick in $44.8 Billion Deal · Bloomberg Intelligence

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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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Speaker 2: Lots of corporate actions in the marketplace today, Lots of
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Speaker 2: M and A activity and in a package good space.
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Speaker 2: One of the giants out there, Unilever, the food business
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Speaker 2: for Unilever, is going to join with McCormick and a
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Speaker 2: forty four point eight billion dollar transaction.
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Speaker 3: We're going to break down this deal.
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Speaker 2: Diana Gomes Joints is Bloomberg Intelligence senior equity analyst.
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Speaker 3: Diana.
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Speaker 2: What's the strategy here of these two companies in combining
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Speaker 2: their food businesses?
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Speaker 4: Hi, thank you. It is really a combination of bringing
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Speaker 4: the expertise from McCormick on the natural ingredients side of
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Speaker 4: things with Union levers food iconic brands in that protein
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Speaker 4: rich toppings. It's it's one of the areas where it
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Speaker 4: makes sense to combine for that added scale and also
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Speaker 4: reaching markets that are comic doesn't have access at the moment,
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Speaker 4: particularly in emerging markets. If we exclude India, which is
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Speaker 4: out of the equation in this In this combination.
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Speaker 5: We're seeing share a McCormick fault three point seven percent.
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Speaker 5: What might investors be skeptical of in this combination?
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Speaker 4: It is a really transformational deal for McCormick. It is
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Speaker 4: quite a sizeable group of assets that they are taking in,
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Speaker 4: so the execution risk is quite high, and it's going
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Speaker 4: to be a much more complex organization too to really
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Speaker 4: push through the sales growth targets that they are envisioning
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Speaker 4: for three to five percent in by year three of
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Speaker 4: the combination, compared to about two percent where the companies
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Speaker 4: have been growing to in terms of this food speed business.
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Speaker 4: So it would be quite a lot of work to
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Speaker 4: get there.
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Speaker 2: Before Unilever here where where do they want to focus
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Speaker 2: going forward?
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Speaker 4: Union lever has been Uni liver Union lever, depending we're
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Speaker 4: in the country. It's really been focusing more in the
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Speaker 4: personal care wellbeing categories, which tend to be less price
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Speaker 4: elastic as well. It's something that can bothe well given
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Speaker 4: the geopolitical macroeconomic risk environment we are sitting on. But
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Speaker 4: even before that, this was the strategy for Fernando Fernandez
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Speaker 4: was bringing that side of the business, making it a
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Speaker 4: much larger proportion of unil evers revenue as well. So
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Speaker 4: this split would fast forward that plan, even though we
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Speaker 4: are at least one year to go for the expected completion.
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Speaker 5: Date, Diana, What does this combination mean for the other
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Speaker 5: big food companies globally, for the Nestle for instance, for
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Speaker 5: craft Tigns, which decided not to split up its businesses
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Speaker 5: as it had once been entertaining under its new CEO.
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Speaker 4: One of the interesting parts of this combination of McCormick
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Speaker 4: with UNIL ever Foods is also beyond the consumer facing
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Speaker 4: business but also the food service so they bring strength
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Speaker 4: from both. So definitely it's going to build their competitive
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Speaker 4: force compared to rivals in that space as well.
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Speaker 3: So I'm just looking at UNI.
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Speaker 2: Down five and a half percent today, down twelve percent
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Speaker 2: year to data. It's had a fifty two week low here.
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Speaker 2: What's the call around this stock? What's the challenge for
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Speaker 2: this for the stock? Is it just simply the group
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Speaker 2: consumer products or something specific to the company.
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Speaker 4: There's definitely some stepticism about the terms of the way
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Speaker 4: the foods business is going to be split, so that
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Speaker 4: we are seeing some reaction today to that it's a
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Speaker 4: deal that is stock heavy. It's mostly stock. The cash
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Speaker 4: consideration is only seven sixteen billion dollars, or they'reabout for
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Speaker 4: a business that was generating about twenty two billion dollars
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Speaker 4: in revenue. So there is some septicism from that perspective.
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Speaker 4: It's not going to be a clear cut exit. And
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Speaker 4: it also comes at the time yes, heightened uncertainty. So
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Speaker 4: I believe that's all playing out a little bit in
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Speaker 4: that sense.
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Speaker 5: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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5:28
Speaker 2: A lot of M and A in the marketplace today,
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Speaker 2: particularly in the healthcare space.
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Speaker 3: What else is new there? But let's break it down
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Speaker 3: with the resident expert.
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Speaker 2: San Fazeli, director of Research for Global Industries and a
5:38
Speaker 2: senior pharmaceuticals analyst for Bloomberg. Intelligency is based in London.
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Speaker 2: Sam Let's start with Eli Lilly. They're acquiring Sintessa Pharmaceuticals,
5:48
Speaker 2: who was Sentessa and why is Lily making this acquisition.
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Speaker 6: So Santesta is a company developing a sleeping sleep disorder product.
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Speaker 6: So it's a novel mechanism of action, not entirely novel,
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Speaker 6: because there's already a drug on the market that targets
6:05
Speaker 6: the same mechanism or ex in pathway in the brain.
6:09
Speaker 6: But it's not the usual kind of drowsy type of
6:14
Speaker 6: drug that puts you to sleep like the ambience of
6:16
Speaker 6: this world. It's not at all the same mechanism of action.
6:19
Speaker 6: So here's a drug that's in development for those for
6:23
Speaker 6: that indication, and we have a proof of concept already
6:26
Speaker 6: or a product on the market, not necessarily flying off
6:29
Speaker 6: the shelves, but doing fine. And so here comes Lily
6:33
Speaker 6: with a neuroscience business, and it's a bolt on to
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Speaker 6: their business. I mean, six billion, is I am not?
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Speaker 6: You know, I don't know a week's worth of cash
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Speaker 6: flow for Lily. I have to do the math. So
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Speaker 6: don't please multiply that by fifty four and tell me
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Speaker 6: Samuel got it wrong. But it's not a lot of money.
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Speaker 6: I mean. The interesting thing, Paul is this, if you
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Speaker 6: look at our analyst forecasts in modl or consensus forecasts
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Speaker 6: is around the two billion dollar business in twenty twenty,
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Speaker 6: twenty thirty three, twenty thirty four. Guess what Lily's top
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Speaker 6: line revenue would be at that point. No, approaching one
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Speaker 6: hundred and fifty billion. Of course, this is this is
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Speaker 6: seven or eight years away, so it's probably all wrong. Nevertheless,
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Speaker 6: that's what consensus has got, so it doesn't make a
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Speaker 6: huge difference. But it's a nartial ladder, okay.
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Speaker 5: So it sounds like this is nice to have, not
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Speaker 5: a need to have. We've seen companies like Mirk make
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Speaker 5: a lot of acquisitions because they mark faces patent expiration
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Speaker 5: on some of its best selling drugs, like you Truda.
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Speaker 5: Lily is not in that position.
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Speaker 6: Is it.
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Speaker 5: So this feels like it's very offensive rather than defensive.
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Speaker 6: Yeah, I mean, farmer companies tend to scramble or scramble
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Speaker 6: sorry at the end, in the final yards of the game,
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Speaker 6: to try and get their pipelines all organized so that
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Speaker 6: they can cope with it. You know, it takes time
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Speaker 6: to develop these franchises. So Lily's doing exactly what he
8:00
Speaker 6: should be doing, just slowly padding it's pipeline, adding more
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Speaker 6: products into it. Now, how do you manage to deal
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Speaker 6: with a drug or a drug group that is going
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Speaker 6: to go off pattern at some point and you're selling
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Speaker 6: one hundred billion of it. I think it's very hard
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Speaker 6: to know which one of these drugs is going to
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Speaker 6: be there. But you need a lot of products to
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Speaker 6: be able to backfill that, and at some point people
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Speaker 6: will start worrying about that. But it's way too soon
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Speaker 6: for us to worry about that with Lily. Let's just
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Speaker 6: see how they do with the current business that they
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Speaker 6: have in terms of the growth that they're getting. Sam.
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Speaker 2: When a drug goes off pattern, what's the what's the
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Speaker 2: timeframe for sales to fall into what the breeder they
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Speaker 2: falls or predictable pattern?
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Speaker 6: Yes, there is, and we have blueprints that we follow
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Speaker 6: when we're doing all our modeling. It depends on what
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Speaker 6: sort of deals they might have done. So, as you know, Paul,
8:54
Speaker 6: we have a very strong patent team led by old
8:57
Speaker 6: Guestpacker in our group, and they've done some work on
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Speaker 6: some of these drugs. You know, where people expect Youtruder
9:02
Speaker 6: from Mark for instance, to expire in twenty twenty nine,
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Speaker 6: they're thinking twenty thirty three, right, So there's room for
9:10
Speaker 6: companies to push these things out a little bit, but
9:12
Speaker 6: eventually they happen. If you're a small molecule, you tend
9:16
Speaker 6: to give have some exclusivity. With one generic company which
9:20
Speaker 6: is legal, they have a six month exclusivity period when
9:24
Speaker 6: they launch. They make a lot of money by dropping
9:26
Speaker 6: the price at a bit. That six month ends and
9:28
Speaker 6: suddenly you get ten of those drugs, the small molecule
9:31
Speaker 6: type pills that we all swallow. That's the pattern. A
9:35
Speaker 6: little drop six months later, catastrophic droup. So, and then
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Speaker 6: the companies themselves make branded generics, et cetera, to keep
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Speaker 6: some other biologics a little bit different because it's harder
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Speaker 6: to make them and sometimes it's more complicated to make
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Speaker 6: sure that you got the right bits and bobs in there,
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Speaker 6: so a little bit smoother.
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Speaker 5: Sam, Before we let you go, I got to ask
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Speaker 5: you about buy Gen buying a palace for five point
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Speaker 5: six billion. If a Lily acquisition for some point a billion,
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Speaker 5: it's kind of a drop in the bucket for that company.
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Speaker 5: How meaningful is this acquisition for Biogen?
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Speaker 6: Yeah, clearly a lot bigger for Biogen on a relative
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Speaker 6: basis in terms of market cap or money expenditure, But
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Speaker 6: it fits in with what the new CEO, Christopher Becker,
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Speaker 6: has been saying about where he sees the company going.
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Speaker 6: Company was broadly viewed as a neurology business, as a
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Speaker 6: company that's focused on neurodiseases, and I think they're pivoting
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Speaker 6: to call it an immunology and rare diseases now, I mean,
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Speaker 6: neurology still fits in. A lot of the disease drugs
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Speaker 6: that you're using for neurology in multiple sclerosis, et cetera
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Speaker 6: do target the immune system because there are two immune diseases.
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Speaker 6: So by rare diseases, sure you get some neurological diseases
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Speaker 6: that are rare so you could treat them there. So
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Speaker 6: it fits in this in that bucket, and I think
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Speaker 6: a Pellis is a is a reasonable fit from that
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Speaker 6: strategy perspective.
10:54
Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 1: you get your podcasts, or watch us live on YouTube.
11:15
Speaker 5: Let's switch gears and take a look at what's happening
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Speaker 5: in the tech sector in video. It feels like it's
11:19
Speaker 5: been quite of late, but it is taking a two
11:22
Speaker 5: billion dollars stake in Marvel Technology, and it's deepening an
11:26
Speaker 5: existing partnership that it has with that company. Man Deep
11:29
Speaker 5: Sing is our global tech research head here at Bloomberg Intelligence,
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Speaker 5: Man Deep, how meaningful is this for Marvel? How meaningful
11:36
Speaker 5: is this for in Vidia?
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Speaker 7: I mean, at this point of time, I feel in
11:40
Speaker 7: Vidia may end up generating one hundred and fifty billion
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Speaker 7: dollars in cash for twenty twenty six hundred and fifty billion,
11:50
Speaker 7: So they keep giving you know, two three billion to
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Speaker 7: pretty much everyone with Not meaningful for Nvidia, not meaningful
11:57
Speaker 7: for Invidia. And look, their playbook right now is to
12:01
Speaker 7: create an ecosystem where in Vidia GPUs are pervasive. Everyone
12:06
Speaker 7: uses them in some capacity. And in this case, Marvell
12:11
Speaker 7: is an acy chip maker that does a lot of
12:16
Speaker 7: networking work for an Amazon So think of how Google
12:21
Speaker 7: has rammed up on Broadcom. Amazon similarly uses Marvel for
12:26
Speaker 7: their custom chip work, networking, et cetera. So by Nvidia,
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Speaker 7: by giving Marvel two billion dollars, is saying, hey, we
12:35
Speaker 7: want to integrate with your ecosystem and you know, we'll
12:39
Speaker 7: we'll make Nvidia GPUs compatible with whatever custom chips that
12:45
Speaker 7: you have. And that is their best way of you know,
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Speaker 7: really spreading their tentacles in terms of enterprise public cloud providers.
12:55
Speaker 7: Even though it's Amazon has their custom chips, in Vidia
13:00
Speaker 7: is finding a way to you know, sell something to
13:03
Speaker 7: their ecosystem.
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Speaker 3: In Vidia, for.
13:07
Speaker 2: I guess counter twenty six the fiscal twenty seven year
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Speaker 2: forecast is two hundred and fifty billion dollars in EBITDA
13:13
Speaker 2: and Capex get this, seven billion dollars.
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Speaker 3: There's only I.
13:18
Speaker 2: Think I might have more Capex except than in Vidia.
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Speaker 5: Just six hundred and sixty billion for the hyper scalers
13:24
Speaker 5: for this year.
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Speaker 7: Yeah, is the beneficiary. They are the ones who are
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Speaker 7: taking the just three guys sitting.
13:30
Speaker 2: In garage is that in video and they're just selling
13:33
Speaker 2: chips to everybody.
13:34
Speaker 3: It's unbelievable.
13:35
Speaker 7: I mean, they've seen a head and partly that has
13:38
Speaker 7: to do with, you know, what they did with Melanox
13:40
Speaker 7: acquisition back in the day. It was a company like
13:43
Speaker 7: Marvel that they bought, you know, five six years back,
13:46
Speaker 7: integrated it really well, and they've just stayed ahead of
13:50
Speaker 7: everyone else, whether it's MD, Intel or anyone else in
13:55
Speaker 7: terms of offering the best performance per what which is
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Speaker 7: what everyone cares about in the world of AI and
14:02
Speaker 7: partnerships like this or even the aquahiers that they made
14:05
Speaker 7: with Rock you know that twenty billion dollar Aquahi Again,
14:10
Speaker 7: you know, Jensen is like three steps ahead of everyone
14:13
Speaker 7: in terms of thinking through what is coming next, and
14:15
Speaker 7: he's thinking about what is the bottomleck when it comes
14:19
Speaker 7: to AI performance and he's saying it's it's memory. I
14:23
Speaker 7: mean some of that has to do with by creating
14:26
Speaker 7: an ecosystem, you'll be able to improve the performance slightly
14:31
Speaker 7: for your chip relative to what Google TPUs will be
14:34
Speaker 7: able to do with other chip providers. And the small
14:37
Speaker 7: increments is what has really kept Nvidia and the lead.
14:40
Speaker 2: And it's not an expense, it's a cheap stock.
14:44
Speaker 3: It's a cheap stock.
14:46
Speaker 7: Yeah.
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Speaker 5: On, So who is Nvidia not hooked up with? Who
14:51
Speaker 5: is Nvidian not partnered with yet?
14:52
Speaker 7: Right now it's a Google ecosystem, the Broadcom Google GPU ecosystem.
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Speaker 7: I would say that's like a para well alternative to
15:02
Speaker 7: Nvidia stack. But again you see that.
15:05
Speaker 5: Do you see there being any kind of synergy between
15:08
Speaker 5: those two at all, I mean, or are they just
15:10
Speaker 5: developing separately on their own paths?
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Speaker 7: They are, I mean Google TPUs are in their seventh versions,
15:16
Speaker 7: so from that perspective, they've had a ton of progress
15:19
Speaker 7: on their own. But again, if you're an enterprise and
15:22
Speaker 7: you are using Nvidia GPUs, you want compatibility, and now
15:27
Speaker 7: it's inevitable that you will be using in Vidia GPUs
15:31
Speaker 7: in some form given how spread in Vidia is at
15:34
Speaker 7: this model. They're like the Intel, you know, twenty years back.
15:38
Speaker 7: I mean they everyone used to use Intel. Everyone is
15:42
Speaker 7: using Nvidia when it comes to AI.
15:44
Speaker 3: Now, stay with us. More from Bloomberg Intelligence coming up
15:47
Speaker 3: after this.
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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and
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Speaker 1: Android Auto with the Work Business App. Listen on demand
16:02
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
16:06
Speaker 2: Saw JP Morgan. They announced something called the American Dream Initiative.
16:11
Speaker 3: I don't know if that is, but our next guest does.
16:12
Speaker 2: Hannah Lovett, Senior finance reporter for a Bloomberg News jointus
16:16
Speaker 2: here in our studio.
16:17
Speaker 3: Hannah, what's J. P.
16:17
Speaker 2: Morgan Chase doing there with their American Dream Initiative.
16:21
Speaker 8: Hey, so thanks for having me. Another initiative from JP Morgan.
16:24
Speaker 8: They've been you know, kind of full of initiatives and
16:26
Speaker 8: acronyms lately. This one American Dream Initiative or ADI. They're
16:30
Speaker 8: going to be investing in local communities across six areas
16:34
Speaker 8: and that includes small business and housing and financial health
16:39
Speaker 8: and you know a few others. And so what it
16:44
Speaker 8: is is small business was the one that they focused
16:46
Speaker 8: on today in the announcement. And I think, you know,
16:48
Speaker 8: they'll be rolling out further announcements as this thing goes,
16:51
Speaker 8: but small business was the focus in today's announcement and
16:54
Speaker 8: for that, they will be investing eighty billion over ten
16:59
Speaker 8: years in lending to small businesses. They're trying to grow
17:02
Speaker 8: their roster of small business clients from seven million today
17:04
Speaker 8: to ten million. They're hiring a thousand more small business bankers,
17:09
Speaker 8: so they have three thousand now. Yeah, so really just
17:13
Speaker 8: trying to you know, dig deeper into the communities and
17:15
Speaker 8: bring together you know, business and in some cases philanthropy.
17:20
Speaker 3: That they do.
17:21
Speaker 2: Because of one of the many firms on Wall Street.
17:23
Speaker 2: I worked at JP Morgan back when they were the
17:25
Speaker 2: Chase Manhattan Bank for the merger of Japen Morgan, and
17:28
Speaker 2: they had a real small business retail focus. The Chasemen
17:32
Speaker 2: hadn't banked and I felt like now that they merged
17:34
Speaker 2: with jpen Morgan, that kind of got.
17:36
Speaker 3: Lost a little bit.
17:37
Speaker 2: You get a sense that they're trying to maybe re
17:39
Speaker 2: establish that part of the business for themselves.
17:41
Speaker 7: Yeah.
17:42
Speaker 8: I mean, they've stayed huge in the consumer side, their
17:44
Speaker 8: credit card businesses that is ginormous. They are the biggest
17:47
Speaker 8: bank mortgage lender. Of course we've had like the non
17:51
Speaker 8: banks growing size of since the crisis, but so that
17:54
Speaker 8: they're big across the consumer. But I think what they're
17:56
Speaker 8: trying to do here is they've had these targeted initiatives
17:58
Speaker 8: in places like Detroit where over the past it's been
18:01
Speaker 8: over a decade now, it's been hundreds of million dollars
18:04
Speaker 8: that they've plowed into Detroit, and that's not you know,
18:08
Speaker 8: some of it's flying through, but it's it's business stuff
18:10
Speaker 8: where it's you know, lending to affordable housing things like that.
18:13
Speaker 8: But where they bring together, you know, various aspects of
18:17
Speaker 8: the behemoth that is JP Morgan to have this targeted
18:20
Speaker 8: effort in you know, in that case Detroit, but now
18:24
Speaker 8: they're trying to kind of replicate and go beyond that
18:27
Speaker 8: and local communities across the country.
18:28
Speaker 2: Is this I mean, this feels like it's the business.
18:31
Speaker 2: I'm trying to think who they'd be really competing. It's
18:33
Speaker 2: I think it's City Bank of America. Those are the
18:36
Speaker 2: ones I think about retail, consumer, small business. Is that
18:40
Speaker 2: kind of who they're going to be going up against her?
18:42
Speaker 8: Increasing it's kind of everyone. I mean b of A
18:44
Speaker 8: and Wells Fargo are both big and small business. But
18:46
Speaker 8: then you also have the regional banks and even you know,
18:49
Speaker 8: the more local community banks that are huge forces in
18:51
Speaker 8: their communities. Although you know, in some sense it's not
18:57
Speaker 8: an effort to kind of take out the community banks.
18:59
Speaker 8: It's an effort to you know, grow the pie for everyone.
19:04
Speaker 2: Interesting, Like I wonder when I see a branch open up,
19:08
Speaker 2: particularly like the one just downstairs in our building here,
19:11
Speaker 2: I can't even think of the bank what it is
19:13
Speaker 2: With all the technology when we do all of our banking,
19:15
Speaker 2: I can remember the last time I was in a
19:16
Speaker 2: branch because you can do everything on your phone. Yet
19:19
Speaker 2: I see branches popping up left and right. What's the
19:22
Speaker 2: business strategy behind that. What did the banks tell you.
19:23
Speaker 8: It's funny because I have covered banking for eight years
19:27
Speaker 8: and I went into a branch recently and got scared.
19:29
Speaker 8: I was like, I don't know how to be in here, right.
19:31
Speaker 8: But JP Morgan has really, like Jamie Diamond, who's been
19:35
Speaker 8: CEO for more than twenty years at this point, has
19:37
Speaker 8: been always been a big believer in the power of
19:40
Speaker 8: the branch, and so they kind of zigged when the
19:43
Speaker 8: rest of the industry zagged a bit on the branch stuff,
19:46
Speaker 8: and they've been adding branches for years and now they're
19:50
Speaker 8: in they're the only bank to be in all lower
19:52
Speaker 8: forty eight states, right, Yeah.
19:54
Speaker 3: So I kind of view it as advertising nothing else.
19:57
Speaker 2: I mean again, I think it's a capital one downstairs
19:59
Speaker 2: in our bill think they got a little cafe down there.
20:03
Speaker 3: People are in there. There's always a lot of people.
20:05
Speaker 2: So it feels like it's a billboard a different type
20:08
Speaker 2: of outdoor advertising for these banks.
20:10
Speaker 8: But totally that's part of the thinking that I've heard,
20:12
Speaker 8: you know, from them and others, is that it is advertising.
20:16
Speaker 8: And also they do some of these things that they're
20:18
Speaker 8: going to do, you know, as part of the American dreamanship,
20:21
Speaker 8: but that they already do, like some of the coaching
20:23
Speaker 8: stuff and where there will be events at the branches
20:25
Speaker 8: and things like that.
20:26
Speaker 2: So what's a big theme that you're working on just
20:28
Speaker 2: for the banks? It seems like they've got an administration
20:30
Speaker 2: that's supportive of the banking system in general and banks
20:33
Speaker 2: all over the places.
20:35
Speaker 3: Do you get a sense of optimism from the companies
20:36
Speaker 3: you cover?
20:38
Speaker 8: Absolutely, I mean, I think, you know, there's a lot
20:39
Speaker 8: going on in the world, but if you look beyond
20:43
Speaker 8: that for a minute, to the extent that you can.
20:45
Speaker 8: I mean, I wrote a story at the end of
20:48
Speaker 8: last year about how it was really, you know, banks
20:52
Speaker 8: fighting back against the buyside and private credit where banks
20:55
Speaker 8: were growing there the big banks were growing their loan
20:57
Speaker 8: books at the fastest rate since in at least a decade.
21:01
Speaker 8: It may have been since pre crisis, but you know,
21:05
Speaker 8: so they're definitely enthused about the level of deregulation and
21:10
Speaker 8: the ability to kind of chip back away at the
21:13
Speaker 8: areas that non being subtripped away at everything.
21:16
Speaker 3: Yes, I agree. I mean, God, we used to make
21:18
Speaker 3: a fortune off of those syndicated loans we did back
21:20
Speaker 3: in the day.
21:22
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