McCormick & Co. has dropped plans to make a takeover bid for Premier Foods plc, insisting the price the UK group’s board wants is too high.
In a statement today (13 April), the US spice maker said it had conducted a review of Premier’s finances, with the full co-operation of the gravy-to-cake maker’s management.
“McCormick has, after careful consideration, concluded that it would not be able to propose a price that would be recommended by the board of Premier Foods while also delivering appropriate returns for McCormick shareholders,” the company said. “Accordingly, McCormick has withdrawn its proposal to acquire Premier Foods.”
Premier’s board had previously rejected three takeover proposals from McCormick. The most recent indicative bid valued Premier at 65 pence a share in cash, or GBP1.5 bn (US$2.2bn), including debt.
Responding to the news, Premier stressed it had “engaged extensively with McCormick to provide it with the information requested”.
The Premier board reiterated its belief the Mr Kipling maker will deliver more value as a stand-alone unit than what could have been derived from McCormick’s previous latest proposal. “The board sees a strong future for an independent Premier Foods, and believes that the foundations have been laid for significant growth and shareholder value creation,” the company said.
The Bisto gravy maker stressed it benefits from “strong” operational cash flows generated by a “valuable portfolio of market leading brands”, supported by an “extensive distribution across key retail channels” and “a well-invested manufacturing base”.
Premier continued it plans to “accelerate its growth” by executing recently announced initiatives to “leverage the company’s existing capabilities, infrastructure and brand equity so as to expand into new formats, channels and markets”.
The group also highlighted the potential offered by its planned tie-up with Japan’s Nissin Foods Holdings.
Nissin, which has taken a 19.9% share in the UK group, has entered into two types of agreement with Premier. The first, a co-operation agreement, will, for example, see the two companies work to “accelerate the distribution” of Premier’s products in key overseas markets. Premier said the deal could also give it “access to Nissin’s innovative products and formats” to distribute in the UK market under both the companies’ brands. The second, a “relationship agreement”, gives Nissin the right to appoint a director to the Premier board.
“The board considers that the company’s longer-term prospects will be enhanced by the cooperation agreement it has signed with Nissin Foods Holdings, which will expand Premier Foods’ range of growth opportunities,” Premier said this morning.
Shares in Premier Foods plunged 30.7% by 08:11 BST this morning, dropping to 39.65p per share.