McCormick & Co. said today (24 March) it would mull making a higher offer for Premier Foods plc, the UK group that has so far rebuffed two takeover approaches, should the US spices and sauces owner be allowed to undertake some due diligence on the Bisto gravy maker.
In a statement this afternoon, McCormick said it was “willing to consider increasing its latest offer if justified” should Premier’s board gave it information on the company’s current trading, major contracts and significant details on its pension liabilities.
McCormick’s interest in Premier was revealed by the UK group yesterday. In the last month, Premier has rejected two takeover proposals from McCormick – one worth 52p a share and a second, made on 14 March, worth 60p a share. Alongside news of McCormick’s interest, Premier also announced plans for a “co-operation agreement” with Japan’s Nissin Foods Holdings.
This morning, Nissin announced it had bought a 17% stake in Premier, which subsequently today saw a major shareholder question the “objectivity and commitment” of the UK group’s board. In response, Premier’s board insisted McCormick’s latest proposal was “highly conditional” and “significantly undervalues the company and its prospects” but underlined it would “give careful consideration” to any improved approaches.
In its statement, McCormick’s questioned the behaviour of the Premier board. “McCormick & Company notes the recent announcements regarding Premier Foods plc and Nissin Foods Holdings Co. McCormick is disappointed that the board of Premier Foods is conducting itself in a way that denies Premier Foods’ shareholders the opportunity to consider McCormick’s highly attractive cash offer. Despite McCormick’s efforts to enter into a meaningful dialogue with Premier Foods on several occasions, the Board of Premier Foods has been unwilling to engage constructively with McCormick,” the US group said.
McCormick insisted it had so far only had one face-to-face meeting with Premier chairman David Beever and had only been given limited details on the company behind Ambrosia custard and Mr Kipling cakes.
“There has been no dialogue at any stage with any other members of the management team or with Premier Foods’ advisers, who had not been identified to McCormick until Premier Foods’ announcement on 23 March 2016. No material information has been shared by Premier Foods beyond confirmation that: management expectations with respect to trading profit and net debt remained unchanged from Premier Foods’ most recent market update; and no change of control in any material licence agreements would be triggered by the completion of the transaction,” McCormick said.
While McCormick is open to considering revising its proposed offer, the Schwartz and Ducros owner reiterated how its 60p-a-share cash offer represented a 90% premium to Premier Foods’ share price before the announcement. McCormick said the proposed offer was also a 55% premium to the UK group’s 12-month, volume-weighted average share price of 38.6p for the period up to 22 March, the day before the US group’s interest emerged. McCormick said the indicative bid also represented “an implied exit multiple of 10.3x pro forma 2015 EBITDA” for Premier shareholders.
It emerged today Nissin had paid US private-equity firm Warburg Pincus 63p a share for its 17.27% stake in Premier.
McCormick added: “McCormick believes that, with its 127-year heritage, it would be an outstanding custodian for the Premier Foods brands, and, with the strength of its balance sheet, can provide benefits for Premier Foods, its pensioners, creditors and other stakeholders, which Premier Foods’ current capital structure cannot deliver. Accordingly, McCormick urges the Premier Foods shareholders to encourage the Board of Premier Foods to engage fully with McCormick.”
Under the UK Takeovers Code, McCormick is required to either announce a firm intention to make a bid for Premier or state it does not intend to table an offer by 17:00 BST on 20 April. The deadline can be extended with the consent of the Takeovers Panel.
In the wake of Premier’s initial announcements yesterday, the company’s shares closed at 53.9p, a jump of over 71% during the day. After news of Nissin’s shareholding in Premier emerged this morning, the Ambrosia custard maker’s stock dropped to 42p. At 16:02 GMT this afternoon, Premier’s shares had recovered to 52.12p, down 3.03% on yesterday’s closing price.