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McCormick Closes 2020 With One More Acquisition

By Demitri Kalogeropoulos - Dec 30, 2020 at 10:22AM

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The spice and flavorings giant is still aggressively adding to its portfolio.

Fresh off the recent purchase of the Cholula hot sauce brand last month, McCormick ( MKC -2.53% ) is at it again. The spice and flavorings giant on Wednesday announced that it struck a deal to acquire FONA International for just over $700 million.

The purchase will strengthen McCormick's portfolio in some attractive niches, including natural foods and citrus and fruit flavorings. It should also add over $100 million in annual sales to the business while pushing profitability higher.

"The acquisition accelerates the strategic migration of our portfolio to more value-added and technically insulated products," CEO Lawrence Kurzius said in a press release. Besides the earlier $800 million purchase of Cholula, McCormick has made other bold bets in recent years, including its $4 billion French's and Frank's buyout in 2017.

A young woman cooking at home.

Image source: Getty Images.

The company has been flush with cash thanks to rising sales volumes in 2020. That success gave management confidence to raise the annual dividend in late November.

Shareholders shouldn't expect to see any impact from the FONA purchase on earnings this year or in 2021. But executives promised to issue some detailed growth and profit projections as part of the food giant's next earnings call in January.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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