Unilever Food Arm to Join McCormick in $44.8 Billion Deal

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1:54Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Lots of corporate actions in the marketplace today. Lots of M &A activity. And in a packaged goods space, one of the giants out there, Unilever, the food business for Unilever, is going to join with McCormick in a$44.8 billion transaction. We want to break down this deal. Diana Gomes joins us, Bloomberg Intelligence Senior Equity Analyst. Diana, what's the strategy here of these two companies in combining their food businesses?

2:36Hi, thank you. It is really a combination of bringing the expertise from McCormick on the natural ingredients side of things with Unilever's Foods, iconic brands, and in that protein-rich toppings. It's one of the areas where it makes sense to combine for that added scale and also reaching markets that McCormick doesn't have access at the moment, particularly in emerging markets, if we exclude India, which is out of the equation in this combination.

3:15Scarlet Fu:We're seeing shares of McCormick fall 3.7 percent. What might investors be skeptical of in this combination? It is a really transformational deal for McCormick. It is quite a sizable group of assets that they are taking in. So the execution risk is quite high and it's going to be a much more complex organization to really push through the sales growth targets that they are envisioning for three to five percent in by year three of the combination compared to about 2 % where the companies have been growing to in terms of these food speed business so it's it would be quite a lot of work to get there.

4:08Before Unilever here where do they want to focus going forward? Unilever has been Unilever, depending in the country. It's really been focusing more in the personal care, well-being categories, which tend to be less price elastic as well. It's something that can bode well given the geopolitical macroeconomic risk environments we are sitting on. But even before that, this was the strategy for Fernando Fernandez, was bringing that side of the business, making it a much larger proportion of Unilever's revenue as well. So this split would fast forward that plan, even though we are at least one year to go for the expected completion date.

5:04Scarlet Fu:Diana, what does this combination mean for the other big food companies globally, for the Nestle, for instance, for Kraft Heinz, which decided not to split up its businesses as it had once been entertaining under its new CEO? One of the interesting parts of this combination of McCormick with Unilever Foods is also beyond the consumer facing business, but also the food service. So they bring strength from both. So definitely it's going to build their competitive force compared to rivals in that space as well. So I'm just looking at Unilever down five and a half percent today, down 12 percent year to date.

5:49It's at a 52 week low here. What's the call around this stock? What's the challenge for this for the stock? Is it just simply the group consumer products or something specific to the company? There's definitely some skepticism about the terms of the way the foods business is going to be split. So we are seeing some reaction today to that. It's a deal that is stock heavy. It's mostly stock. The cash consideration is only$16 billion or thereabouts for a business that was generating about$22 billion in revenue. So there is some skepticism from that perspective. It's not going to be a clear-cut exit.

6:42And it also comes at a time of heightened uncertainty. So I believe that's all playing out a little bit in that sense.

6:52Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility.

7:35Scarlet Fu:But even the best strategies can't prevent every bad day. For more than 75 years, Cincinnati Insurance has helped individuals and businesses navigate tough moments with expertise, personal attention, and independent agents who focus on relationships, not transactions. The Cincinnati Insurance Companies. Let them make your bad day better. Find an agent at CINFIN.com. This podcast is brought to you by WISE, the app for international people using money around the globe. When it comes to sending money abroad, many providers claim to offer free fees and competitive rates. But don't be fooled. This can be code for inflated exchange rates.

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9:04Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. A lot of M &A in the marketplace today, particularly in the health care space. What else is new there? Let's break it down with the resident expert, Sam Fezzelli, Director of Research for Global Industries and a Senior Pharmaceuticals Analyst for Bloomberg Intelligence. He is based in London. Sam, let's start with Eli Lilly. They're acquiring Centessa Pharmaceuticals.

9:38Who is Centessa and why is Lilly making this acquisition? So Centessa is a company developing a sleeping sleep disorder product. product so it's a novel mechanism of action not entirely novel because there's already a drug on the market that targets the same mechanism orexin pathway in the brain but it's not the usual um kind of drowsy type of drug that puts you to sleep like the the ambience of this world it's not at all the same mechanism of action so here is a drug that's in development for those for that indication and we have a proof of concept already on a product on the market not necessarily flying off the shelves, but doing fine.

10:21And so here comes Lilly with a neuroscience business, and it's a bolt-on to their business. I mean,$6 billion is, I don't know, a week's worth of cash flow for Lilly. I have to do the math, so don't please multiply that by 54 and tell me, Sam, you got it wrong. But it's not a lot of money. I mean, the interesting thing, Paul, is this, if you look at our analyst forecasts in MODL, our consensus forecast, is around the$2 billion business in 2033, 2034. Guess what, Lily's top-line revenue would be at that point? Oh, boy. Approaching$150 billion. Of course, this is seven or eight years away, so it's probably all wrong.

11:05Nevertheless, that's what consensus has got. So it doesn't make a huge difference, but it's an arsenal add-on.

11:11Scarlet Fu:OK, so it sounds like this is a nice to have, not a need to have. We've seen companies like Merck make a lot of acquisitions because Merck faces patent expiration on some of its best selling drugs like Keytruda. Lilly is not in that position, is it? So this feels like it's very offensive rather than defensive. Yeah, I mean, pharma companies tend to scramble or scramble, sorry, at the end in the final yards of the game to try and get their pipelines all organized so that they can cope with it. You know, it takes time to develop these franchises. So Lily's doing exactly what he should be doing, just slowly padding this pipeline, adding more products into it.

11:56Now, how do you manage to deal with a drug or a drug group that is going to go off patent at some point and you're selling 100 billion of it? I think it's very hard to know which one of these drugs is going to be there, but you need a lot of products to be able to backfill that. And at some point, people will start worrying about that, but it's way too soon for us to worry about that. With Liddy, let's just see how they do with the current business that they have in terms of the growth that they're getting. Sam, when a drug goes off patent, what's the timeframe for sales to fall and to what degree do they fall?

12:32Is there a predictable pattern? yes there is and we have blueprints that we follow when we're doing all our modeling um it depends on what sort of deals they might have done so as you know uh paul we have a very strong patent team led by ord gerspacher in our group and they've done some work on some of these drugs you know where people expect the keytruda from merck for instance to expire in 2029 they're thinking i think in 2033 right so there's room for companies to push these things out a little bit but eventually they happen if you're a small molecule you tend to give have some exclusivity with one generic company which is legal they they have a six month exclusivity period when they launch they make a lot of money by dropping the price a little bit that six month ends and suddenly you get 10 of those drugs the small molecule type pills that we all swallow that's the pattern a little drop six months later catastrophic drop so and then the companies themselves make branded generics, et cetera, to keep some of that.

13:33Biologics a little bit different because it's harder to make them. And sometimes it's more complicated to make sure that you got the right bits and bobs in there. So a little bit smoother.

13:43Scarlet Fu:Sam, before we let you go, I got to ask you about Biogen buying a Pellis for 5.6 billion. If a Lilly acquisition for 7.8 billion is kind of a drop in the bucket for that company, how meaningful is this acquisition for Biogen? Yeah, clearly a lot bigger for Biogen on a relative basis in terms of market cap or money expenditure. But it fits in with what the new CEO, Christopher Bakker, has been saying about where he sees the company going. The company was broadly viewed as a neurology business, as a company that's focused on neurodiseases. And I think they're pivoting to call it an immunology and rare diseases.

14:19Now, neurology still fits in there. A lot of the disease drugs that you're using for neurology in multiple sclerosis, et cetera, do target the immune system because they're autoimmune diseases. So, but rare diseases, sure, you get some neurological diseases that are rare, so you can treat them there. So it fits in that bucket. And I think Appelius is a reasonable fit from that strategy perspective. Stay with us. More from Bloomberg Intelligence coming up after this. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work.

15:09Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM.

15:19Scarlet Fu:If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility. But even the best strategies can't prevent every bad day. For more than 75 years, Cincinnati Insurance has helped individuals and businesses navigate tough moments with expertise, personal attention, and independent agents who focus on relationships, not transactions. The Cincinnati Insurance Companies. Let them make your bad day better. Find an agent at c-i-n-f-i-n dot com.

16:20reals in Rio? The Wise Travel Card gives you the mid-market rate on every purchase. No costly markups on your bill. Getting paid in dollars for your side gig? Avoid hidden fees and get the real exchange rate every time. With 24-7 access to live support, your international transactions with Wise are quick, transparent, and safe. Plus, Wise runs over 7 million daily checks to catch and prevent fraud. 15 million people already trust Wise to manage their money internationally. Be smart. Get wise. Download the Wise app today or visit wise.com. Terms and conditions apply.

16:56Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's switch gears and take a look at what's happening in the tech sector. NVIDIA, it feels like it's been quite of late, But it is taking a$2 billion stake in Marvell technology, and it's deepening an existing partnership that it has with that company. Mandeep Singh is our global tech research head here at Bloomberg Intelligence. Mandeep, how meaningful is this for Marvell?

17:32Scarlet Fu:How meaningful is this for NVIDIA? I mean, at this point of time, I feel NVIDIA may end up generating$150 billion in cash for 2026. $150 billion. So they keep giving, you know, two, three billion to pretty much everyone. Not meaningful for NVIDIA. Not meaningful for NVIDIA. And look, their playbook right now is to create an ecosystem where NVIDIA GPUs are pervasive. Everyone uses them in some capacity. And in this case, Marvell is an ASIC chip maker that does a lot of networking work for an Amazon. So think of how Google has ramped up on Broadcom. Amazon similarly uses Marvell for their custom chip work, networking, etc.

18:25So NVIDIA, by giving Marvell$2 billion, is saying, hey, we want to integrate with your ecosystem. And we'll make NVIDIA GPUs compatible with whatever custom chips that you have. And that is their best way of, you know, really spreading their tentacles in terms of enterprise, public cloud providers, even though it's Amazon has their custom chips. NVIDIA is finding a way to, you know, sell something to their ecosystem. NVIDIA for, I guess, calendar 26, the fiscal 27 year, forecast is$250 billion of EBITDA. And CapEx, get this,$7 billion. There's only, I think I might have more CapEx than NVIDIA.

19:17Scarlet Fu:Compared to$660 billion for the hyperscalers for this year. NVIDIA is the beneficiary. They are the ones who are taking the CapEx job. So is it just three guys sitting in a garage? Is that NVIDIA? And they're just selling chips to everybody? It's unbelievable there's no CapEx. They've been ahead. And partly that has to do with what they did with Mellanox acquisition back in the day. It was a company like Marvel that they bought, you know, five, six years back, integrated it really well. And they've just stayed ahead of everyone else, whether it's AMD, Intel or anyone else in terms of offering the best performance per watt, which is what everyone cares about in the world of AI.

19:57And partnerships like this or even the aqua hires that they made with Grok, you know, that 20 billion dollar aqua hire. Again, Jensen is like three steps ahead of everyone in terms of thinking through what is coming next. And he's thinking about what is the bottleneck when it comes to AI performance. And he's saying it's memory. I mean, some of that has to do with by creating an ecosystem, you'll be able to improve the performance slightly for your chip relative to what Google TPUs will be able to do with other chip providers. And these small increments is what has really kept NVIDIA in the lead.

20:36It's not an expense. It's a cheap stock. It's 20 times earnings, NVIDIA. It's a cheap stock. Yeah.

20:43Scarlet Fu:Unbelievable. So who has NVIDIA not hooked up with? Who has NVIDIA not partnered with yet? Right now, it's a Google ecosystem, the Broadcom, Google GPU ecosystem. I would say that's like a parallel alternative to NVIDIA stack. But again... Do you see that? do you see there being any kind of synergy between those two at all? I mean, or are they just developing separately on their own paths? They are. I mean, Google TPUs are in their seventh version. So from that perspective, they've had a ton of progress on their own. But again, if you're an enterprise and you are using NVIDIA GPUs, you want compatibility.

21:22And now it's inevitable that you will be using NVIDIA GPUs in some form, given how spread NVIDIA is at this point. They're like the Intel, you know, 20 years back. I mean, everyone used to use Intel. Everyone is using NVIDIA when it comes to AI now. Stay with us. More from Bloomberg Intelligence coming up after this. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work.

22:06Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM.

22:16Scarlet Fu:If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility. But even the best strategies can't prevent every bad day. For more than 75 years, Cincinnati Insurance has helped individuals and businesses navigate tough moments with expertise, personal attention, and independent agents who focus on relationships, not transactions. The Cincinnati Insurance Companies. Let them make your bad day better. Find an agent at CINFIN.com. This podcast is brought to you by WISE, the app for international people using money around the globe. When it comes to sending money abroad, many providers claim to offer free fees and competitive rates.

23:02But don't be fooled. This can be code for inflated exchange rates. With the Wise account, you can send, spend, and receive money in over 40 currencies without ever having to worry about hidden fees. Sending pounds across the pond? Most transfers arrive in 20 seconds or less. Spending reals in Rio? The Wise Travel Card gives you the mid-market rate on every purchase. No costly markups on your bill. Getting paid in dollars for your side gig? Avoid hidden fees and get the real exchange rate every time. With 24-7 access to live support, your international transactions with WISE are quick, transparent, and safe.

23:35Plus, WISE runs over 7 million daily checks to catch and prevent fraud. 15 million people already trust WISE to manage their money internationally. Be smart. Get WISE. Download the WISE app today or visit WISE.com. Terms and conditions apply.

23:53Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. So JP Morgan, they announced something called the American Dream Initiative. I don't know what that is, but our next guest does. Hannah Levitt, senior finance reporter for Bloomberg News, joins us here in our studio. Hannah, what's JP Morgan Chase doing there with their American Dream Initiative? Yeah. Hey, so thanks for having me. Another initiative from J.P.