- The Washington Times - Tuesday, May 13, 2003

Spice giant McCormick & Co. Inc.’s plans to buy Zatarain’s, a New Orleans-based spices and food company, gave an extra boost to rising shares after a profitable first quarter.

The Sparks, Md., spice company announced Thursday that it would buy the brand of Cajun-style rice mixes and jambalaya seasoning from Citigroup Venture Capital for $180 million in cash.

The deal, which is subject to regulatory approvals and a shareholder vote, is expected to close by June.

McCormick Assistant Treasurer Joyce Brooks said the company had its eyes on Zatarain’s for a long time. It plans to market the spice and food line more aggressively in the food services industry and internationally.

“Zatarain’s has a strong presence in the Southeast, but we feel we can expand the product line to our international markets in the United Kingdom, Canada, and France,” Ms. Brooks said.

The acquisition is expected to add 1 cent to 2 cents to the 2003 forecast earnings of $1.37 to 1.40 per share and $45 million to 2003 sales, which are forecast at $2.36 billion to $2.46 billion.

McCormick’s shares on the New York Stock Exchange closed yesterday at $26.36, up 39 cents from $25.97 on Friday.

Lawrence Kurzius, Zatarain’s president and chief executive officer, said he expects the buyout to give Zatarain’s an international presence.

“We have been marketing our products domestically, primarily in the Gulf states. But with McCormick’s marketing capabilities and sales clout, we expect to have worldwide exposure,” he said.

While several analysts said the purchase fits McCormick’s product line, the company still has international challenges to resolve.

McCormick’s joint venture in Mexico offset strong U.S. sales in the first quarter ended Feb. 28 with higher costs for raw material and greater competition, said John McMillin, analyst with Prudential Securities Inc., a New York securities firm, in a statement.

Sales in the first quarter climbed 8 percent to $555 million from $518 million in the previous year, pushing income up 4 percent to $35.1 million (25 cents per share) from $33.8 million (24 cents) a year earlier.

“The new goals for 2003 including the acquisition are nice enough, but the internal performance is nothing to get excited about,” Mr. McMillin said, advising investors to hold the stock. Mr. McMillin and Prudential do not own any McCormick stock.

Michael Kress, equity analyst at Pershing LLC, a Jersey City, N.J., brokerage firm, said he expected a modest boost from the acquisition but continued to rate the company as neutral.

“We are looking very positively at the company, but I’m sure there will be some costs incurred in the acquisition, ” said Mr. Kress, who does not own any McCormick stock.

But the purchase would leverage the company’s product line and distribution power, said Mitchell Pinheiro, equity analyst at Janney Scott Montgomery, a Philadelphia investment brokerage firm that does not own shares of McCormick.

“Zatarain’s dinner side dishes bring McCormick into a new arena that fits nicely with the company’s niche products,” said Mr. Pinheiro, who rated McCormick as a buy.

Zatarain’s manufactures more than 200 products, including seafood seasonings, that fit with McCormick’s Old Bay Seasoning, Mr. Pinheiro added.

While Mr. Pinheiro and Janney Scott do not own any McCormick stock, the firm is pursuing a banking relationship with the spices company.

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