Consumer-focused private equity firm L Catterton has sold the premium Mexican hot sauce brand for $800 million
Cholula hot sauce product display
Photo as seen on Cholula’s Facebook page

McCormick & Co, a global player in the flavour category, has completed the purchase of the parent company of flavour brand Cholula Hot Sauce from L Catterton. 

“We are pleased to conclude our successful partnership with Cholula,” said Matt Leeds, partner at L Catterton. “It was a privilege to invest in this iconic brand, and we are confident that Cholula will continue to grow and thrive under McCormick’s ownership.”

Cholula, a premium Mexican hot sauce brand, is a strong addition to McCormick’s global branded flavour portfolio, broadening its offering in the high growth hot sauce category to consumers and foodservice operators.

“We are very excited about the acquisition of Cholula as it reinforces our overarching focus on growth and creating long-term shareholder value,” said Lawrence Kurzius, chairman, president and chief executive officer. 

Kurzius added: “Employees of Cholula have built a strong foundation, and when combined with McCormick’s operational expertise and infrastructure, we plan to drive further growth of this iconic brand.”

The financials

McCormick funded the purchase price of $800 million through a combination of cash on hand and commercial paper.

McCormick expects transaction and integration costs to dilute earnings per share in fiscal years 2020 and 2021 and have no impact to adjusted earnings per share in both years. 

The company manufactures, market and distribute spices, seasoning mixes, condiments and other flavorful products to the entire food industry including e-commerce channels, grocery, food manufacturers and foodservice businesses. 

Popular brands in the portfolio include McCormick, French’s, Frank’s RedHot, Stubb’s, OLD BAY, Lawry’s, Zatarain’s, Ducros, Vahiné, Cholula, Schwartz, Kamis, Kohinoor, DaQiao, Club House, Aeroplane and Gourmet Garden. Every day, no matter where or what you eat or drink, you can enjoy food flavored by McCormick.

The company will provide guidance for fiscal 2021, inclusive of the acquisition, on its fourth-quarter earnings call in January 2021.

Morgan Stanley acted as lead financial advisor to Cholula while Houlihan Lokey acted as financial advisor. Kirkland & Ellis LLP acted as legal advisor to L Catterton and Cholula.

Date published: 30 November 2020

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