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March 30, 2016

Nissin Foods Holdings increases stake in Premier Foods

Nissin Foods Holdings, the Japanese noodle maker, has increased its stake in Premier Foods, the UK group that is a takeover target of US spices giant McCormick & Co.

By Dean Best

Nissin Foods Holdings, the Japanese noodle maker, has increased its stake in Premier Foods plc, the UK group that is a takeover target of US spices giant McCormick & Co.

In a statement to the London Stock Exchange this morning (30 March), Nissin announced it held a 19.9% shareholding in Premier.

On Thursday, Nissin bought a 17.27% chunk of Premier that was owned by US private-equity firm Warburg Pincus.

News of Nissin’s latest share purchase came just two hours after McCormick returned with a higher proposed offer to buy Premier. McCormick tabled an indicative bid worth 65p a share – up from the 60p-a-share approach that Premier turned down earlier this month. However, the shares were acquired yesterday, before McCormick’s latest proposal was announced.

Premier revealed last Wednesday it had rebuffed two approaches from McCormick. On the same day, the UK group announced plans for two types of agreement with Nissin. 

Premier said it had agreed to enter a co-operation agreement with Nissin. The deal will, for example, see the two companies work to “accelerate the distribution” of Premier’s products in key overseas markets. The UK group said the agreement could also give it “access to Nissin’s innovative products and formats” to distribute in the UK market under both the companies’ brands.

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In a lengthy statement to the stock market, Premier also revealed it was mulling entering into what is called under UK stock exchange rules a conditional “relationship agreement” with Nissin. Such an arrangement would give Nissin the right to appoint a non-executive director to the Premier board, should the Japanese group take a minimum 15% stake in the company.

Nissin’s acquisition of the Warburg Pincus stake a day later saw the Japanese group announce it  “dispatch” of a non-executive director to the Premier board.

Premier’s rejection of McCormick’s first two proposals, the agreement with Nissin and the Japanese group’s investment in the UK business led to criticism of the Bisto gravy maker from some of its shareholders. Premier responded on Thursday to insist it was open to “improved proposals”.

The agreements between Premier and Nissin are dependent on the UK group remaining independent.

A report in UK newspaper The Daily Telegraph yesterday said Premier had informed Nissin of McCormick’s interest in the business before the Japanese company acquired the Warburg Pincus stake.

Premier told the newspaper after the company’s board came to the decision McCormick’s offer significantly undervalued the company it moved “to accelerate the commercial opportunity”.

A Premier spokesperson said: “Nissin was aware of the approach from McCormick because it was essential before committing to the commercial collaboration. Premier Foods, believing the offer did not value the company, moved to pursue more value creating opportunities.”

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