MCCORMICK & CO. INC. $60 - New York symbol MKC

MCCORMICK & CO. INC. $60 (New York symbol MKC; Income Portfolio, Consumer sector; Shares outstanding: 120.2 million; Market cap: $7.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.1%; TSINetwork Rating: Average; www.mccormick.com) is buying Wuhan Asia-Pacific Condiments Co., Ltd., a leading maker of bouillon products in China.

The company will pay $141 million for this business when the deal closes in mid-2013.

To put that price in context, McCormick earned $80.4 million, or $0.60 a share, in its fiscal 2012 second quarter, which ended May 31. 2012. The new operations will add $115 million to McCormick’s annual sales of $3.9 billion.

Expanding by acquisition adds risk. However, McCormick has a long history of absorbing new operations and making them more profitable. As well, buying established firms is an easier way for the company to enter unfamiliar foreign markets than building new businesses from scratch.

McCormick has operated in China for over 20 years, and this purchase nicely complements its existing products including spices, seasonings and sauces.

Moreover, more Chinese now see packaged foods as an affordable luxury. As a result, McCormick expects annual sales for this new operation to rise at least 10%.

McCormick is a buy.

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