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McCormick Swallows Cholula Hot Sauce in $800 Million Deal

Kirkland is mentioned in Law360 regarding the Firm’s role in McCormick & Co.’s acquisition of Cholula Hot Sauce from L Catterton.

U.S. spice giant McCormick & Co., counseled by Cleary Gottlieb, has agreed to swallow Cholula Hot Sauce from Kirkland & Ellis-advised private equity firm L Catterton for $800 million, the companies said Tuesday.

The deal sees Maryland-based McCormick picking up the New Jersey-based parent company of Cholula Hot Sauce, called The Cholula Food Co., according to a statement. The acquisition stands to bolster McCormick's portfolio of hot sauce brands, which also includes Franks RedHot.

Lawrence E. Kurzius, chairman, president and CEO of McCormick, said in the press release that "hot sauce is an attractive, high-growth category and, as an iconic premium brand, Cholula is outpacing category growth."

"As McCormick continues to capitalize on the growing consumer interest in healthy and flavorful eating, Cholula, a brand known for authentic bold and spicy Mexican flavors, is a strong complement to our portfolio providing consumers and foodservice operators with an even more diverse product offering that we expect will strengthen our growth opportunities," Kurzius added.

Cholula boasts annual net sales of about $96 million, and the company expects that number to grow once the coronavirus pandemic is in the rearview mirror. The company offers six different hot sauce flavors, which are made in Mexico and are based on a century-old recipe. 

The sale of Cholula comes not too long after L Catterton acquired the company. The private equity firm completed its purchase of the hot sauce brand in April 2019 and subsequently carved it out into a stand-alone business, according to statements from the time. Financial terms of L Catterton's 2019 acquisition of Cholula were not disclosed.

In a separate Tuesday press release from L Catterton, Scott Dahnke, global co-CEO of the firm, said that "Cholula is one of the most iconic assets within the food and beverage landscape, and we immediately recognized that there were a number of exciting ways to realize its potential as a standalone business." 

"In a category that continues to benefit from a number of strong secular tailwinds and attractive consumer trends, Cholula's best-in-class team and refocused business strategy have positioned the company as a clear leader in a large and growing segment," Dahnke added.

The deal, which is subject to customary closing conditions, is expected to close by the end of this year.

Cleary Gottlieb Steen & Hamilton LLP is serving as legal counsel to McCormick, with Goldman Sachs Group Inc. acting as financial adviser.

The Cleary M&A team includes partners David Leinwand and Glenn McGrory and associates Kelsey Nussenfeld and Nimat Lawal; antitrust partner Brian Byrne and associates Jeanne-Paloma Zelmati and Savannah Haynes; employee benefits partner Michael Albano and associates Stephanie Edel and Shelbi Vaughn; intellectual property partner Daniel Ilan and associates Brenden Cohen and Jae Sung Kim; tax partner Corey Goodman and associates Michael Eis and Hunter McWinn; financing partner Duane McLaughlin and associates Jae Hyung Ryu, Parker Armsby and Charles Nwaogu; environmental counsels Rick Bidstrup and Beau Sterling and associate Madison Bush; and anti-corruption compliance senior attorney Jim Corsiglia.

Kirkland & Ellis LLP is serving as legal counsel to L Catterton and Cholula, with Morgan Stanley & Co. LLC acting as lead financial adviser and Houlihan Lokey Inc. also acting as a financial adviser.

The Kirkland team was led by transactional partners Joshua Kogan and Carlo Zenkner, and included corporate attorneys Serena Shi and Blair Baker; tax attorneys Vin Thorn, Vivek Ratnam and Grant Michael Newman; antitrust attorneys Kate Rocco and Sarahi Constantine Padilla; intellectual property attorneys Matt Lovell and Jeff Seroogy; executive compensation attorneys Kate Coverdale and Jake Alexander Ebers; employee benefits attorneys Alexandra Mihalas and Hannah Barlow; labor attorney Mike Schulman; international trade attorneys Mario Mancuso and Matt O'Hare; debt finance attorneys Jason Kanner, Kathryn Keves Leonard, Alena Thomas, and Sumer Marquette

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