Japanese food giant Nissin Foods Holdings has agreed to acquire a 17.27% stake in Premier Foods plc a day after the Mr Kipling owner revealed it has turned down two takeover approaches from US spice maker McCormick & Co.

In an announcement this morning (24 March), Premier said Nissin has agreed to buy the stake in the UK group from an “existing shareholder”. 

The Premier board “welcomed” Nissin as a “long-term shareholder who understands and supports Premier’s growth ambitions”. 

Premier and Nissin revealed yesterday they had entered into a “co-operation agreement”. 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. 

Speaking this morning, Premier chairman David Beever said: “By gaining a strategic investor who understands and supports our growth ambitions, we have an exceptional opportunity to deliver shareholder value. Based on the conditional cooperation agreement we announced yesterday, we very much look forward to working with Nissin to develop ways our two businesses can co-operate to drive growth.”

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Premier said it was also mulling a so-called “relationship agreement” with Nissin, where the Japanese group would obtain the right to appoint a non-executive director to the Premier board, should it take a minimum 15% stake in the company.

In a statement released this morning, Nissin confirmed the move to acquire shares will also include the “dispatch” of a non-executive director to the Premier board. On the formation of the of the relationship agreement, Nissin said it will “proceed with discussions”. 

Premier received two takeover approaches from McCormick in the last month. The second came on 14 March, when McCormick outlined a potential all-cash offer worth 60p per Premier Foods share, up from the initial indicative bid worth 52p, lodged on 12 February. 

McCormick’s first move was described by Premier as “an unsolicited, non-binding and highly conditional approach”. Premier also said the second approach “significantly undervalues the company and its prospects” and the company’s board “does not consider that the proposal would be in the best interests of Premier and its shareholders”. 

The US group, however, insisted yesterday its latest offer “should be well received” by the UK group’s investors.

McCormick said the second proposal reflected “a substantial premium to all relevant recent Premier share price metrics”. The 60p-per-share approach represented a 90% premium to Premier’s share price before the announcement, and a 55% premium to the UK group’s 12-month, volume-weighted average share price of 38.6p for the period up to yesterday.

“In addition, the implied exit multiple of 10.3x pro forma 2015 EBITDA compares favourably with recent significant UK food transactions,” McCormick said. “McCormick believes that an all-cash offer at this level should be well received by Premier Foods’ shareholders, employees, pensioners and other stakeholders, and would provide Premier Foods’ shareholders with an attractive premium combined with the certainty of cash value now.”

Shares in Premier Foods surged from an open of 31p per share to close at 51p per share in London yesterday. However, the group’s share price had fallen almost 10% to 48.1p per share at 08:24 UK.