March 11, 2015
McCormick & Co. Inc. has signed an agreement to form a joint venture with Kohinoor Foods Ltd to market and sell its basmati rice and food products in India. The completion of the agreement is expected to occur later in 2011 subject to regulatory and other approvals in India.
The new joint venture, Kohinoor Specialty Foods India will sell and market ‘Kohinoor' branded food products in India. A modern factory for packaged food products and 275 employees will also transfer to the joint venture.
McCormick will invest a total of $115 million for this transaction, which will include McCormick holding an 85 percent interest in the new joint venture, the transfer of certain trademarks and non-compete undertakings from KFL and the Arora family entities. The new joint venture will enter into an exclusive agreement with KFL to source, process and package branded basmati rice through KFL's existing facility.
"We are confident it will be a win-win situation for all stakeholders and add immense value to both consumers and the packaged food industry in India," Satnam Arora, joint managing director of Kohinoor Foods Ltd, says.
Kohinoor Speciality Foods India builds upon McCormick's investments in India since it first joined with A.V. Thomas Group in 1994. Since then, AVT McCormick Ingredients Private Limited has grown into a leading supplier of cleaned, steam sterilized, ready to use spice ingredients for the global market. In 2010, McCormick acquired a 26 percent interest in Eastern Condiments Private Limited, which manufactures and markets a leading brand of spices, seasonings and other related food products in India and the Middle East. Including India, McCormick expects emerging markets to contribute 12 percent of sales by 2015, an increase from 9 percent in 2010.
Annual net sales of Kohinoor Specialty Foods India are projected to be approximately $85 million. Upon closing, McCormick will finance the transaction through cash and debt. McCormick will consolidate sales and profits from Kohinoor Specialty Foods India in its financial results, with a minority interest reduction to net income for the 15 percent of the joint venture owned by KFL. In 2011, transaction and closing costs are expected to more than offset McCormick's share of profit from the joint venture and reduce earnings per share approximately $0.02 to $0.03. Beginning in 2012, the joint venture is expected to be accretive to McCormick's earnings per share, even with the impact of incremental marketing and business building activity.
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