US spice maker McCormick & Co continues to ramp up its capabilities by striking partnerships in India. The food and seasonings maker is now forming a joint venture with India-based Kohinoor Foods Ltd to market and sell the latter’s basmati rice and food products in India.
McCormick, which sells spices, herbs, seasoning blends and sauces to grocers, warehouse clubs and discount & drug stores, said it would invest $115 million for an 85 per cent stake in Kohinoor Speciality Foods India Pvt Ltd, valuing the firm at $135 million (Rs 608 crore). The deal is expected to close later this year, subject to regulatory and other approvals in India.
Kohinoor Foods Ltd was trading almost flat at Rs 53.4 at BSE on Thursday, valuing the firm at Rs 150 crore. Its 15 per cent stake in the new JV itself is worth Rs 91 crore.
Annual net sales for Kohinoor Speciality Foods India are projected to be about $85 million. The company makes and distributes rice, cooking pastes, spices, seasonings and frozen food items in India.
The venture builds on McCormick’s investments in India and its strategy to expand sales in emerging markets. Including India, McCormick expects emerging markets to contribute 12 per cent of sales by 2015, an increase from 9 per cent in 2010.The company expects the deal to reduce its earnings per share by about 2-3 cents a share this year and add to earnings from 2012.
This will be McCormick's third joint venture in India. Last year, McCormick & Company had acquired 26 per cent stake for approximately $35 million in Kerala-based Eastern Condiments Pvt Ltd, valuing the company at around $135 million. The leading spice and seasoning business had annual sales of $67 million in the year ended March, 2010.
Since 1994, McCormick has had a 50 per cent interest in India-based AVT McCormick Ingredients Pvt Ltd, which claims to have a leadership position in producing cleaned, steam-sterilized, ready-to-use spice ingredients for the global market.
Shares of the NYSE-listed spice maker fell 51 cents to close at $49.68. Shares of Sparks, Maryland-based McCormick – which sells its products under Lawry’s and Old Bay labels besides its namesake brand – closed at $49.68 on Wednesday on the New York Stock Exchange.