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McCormick & Company, Incorporated Message Board

  • rar_biltong rar_biltong Sep 4, 2012 5:33 PM Flag

    Is McCormick in Play???

    My wife and I have been long time holders of MKC and currently have about 1,800 shares patiently acquired via purchase and dividend reinvestment over more than a decade. The current price is out of character for the stock and we would take some off the table except for the following observation. Is someone putting the stock in play? With a market cap of around $7.5 billion it is well within the possibility of a Kraft, Nestle or Unilever making a run at it. Any thoughts?

    Sentiment: Hold

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    • At some point MKC will get bought. When and by whom is the question. I plan to hold on for now.

    • I've thought about that as well, but would consider it to be doubtful. In my opinion this is simply the result of the compounded value of the company reaching a critical point and finally being realized by the Street for the relative security-mixed-with-growth that this stock/company offers. In terms of share price, this is nothing new (as you would know having held it for so long), considering that it would be trading north of $240 if you factor out the stock splits.

      Market cap is getting a little steep on a price to sales valuation, but the company has made some notable acquisitions and is making solid advances into areas witnessing significant and reliable consumer income levels and growth, especially when considered from Purchasing Power Parity to the U.S.

      Not sure there would buyers lining up that would justify the cost in terms of looking for something significantly accretive to their own earnings. MKC is really a value play with retained earnings and growth compounding on itself. The business model and investment horizon would put someone along of the lines of Berkshire as the acquirer.

      Further, their business model works well when looking at MKC as an enclosed operation. I think it would be dilutive to earnings and margins for another food products company to buy them. Also, since MKC makes products for other brand names that a Kraft or a Unilever competes with, there might be some anti-trust, etc. difficulties in that the buyer would then have the ability to possibly strong-arm their competitors over pricing as well as having gained undue leverage over retail locations.

      In all honesty, I hope they don't get bought out. There is too much money to be made holding this for the duration (so long as the story/fundamentals don't falter) then in a quick buyout payout.

      For what it's worth-- look at HNZ. They have been making some nice new 52 week highs in the past few months. Pulled back a little, but looking to run up again. Really, I think it's a building sector/investor style rotation that is pushing more money into these types names.

 
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