Premier Foods plc today (6 April) revealed it has had “constructive discussions” with McCormick & Co., the US herbs and spices maker that has expressed interest in buying the UK group.
In a brief statement to the London Stock Exchange ahead of meetings with institutional investors, Premier said it had presented its US suitor with details of its own plans to grow the business and more details on plans to pay the Mr Kipling maker’s pension deficit.
The presentations had come in the wake of Premier last week rejecting a third proposed takeover offer from McCormick worth 65 pence a share – but saying it was open to meeting the Schwartz spices maker and providing it with some due diligence on the business.
“Premier’s senior management has made detailed presentations to McCormick’s senior team regarding Premier’s business and, in particular, the value creation potential of the new strategic initiatives outlined in Premier’s announcement of 23 March,” the Ambrosia custard maker said this afternoon. “Premier and its advisers have also had detailed discussions with McCormick and its advisers regarding Premier’s pension plans. The discussions between McCormick, Premier and their respective advisers have been constructive.”
The “new strategic initatives” set out on 23 March included “building on” the “successful trial” of Mr Kipling and Cadbury cake lines, taking grocery brands into chilled aisles and growing its business outside the UK through its cake brands. Premier upped its forecast for medium-term sales growth from 1-2% a year to 2-4%.
They were announced on the same day Premier revealed it had turned down two proposed takeover offers from McCormick. On 12 February, McCormick approached Premier with an indicative bid worth 52p a share. On 14 March, McCormick returned with a second, potential bid worth 60p a share. Premier has insisted all three proposals have “undervalued” the business “and its prospects”.
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In the same statement, Premier also announced plans enter a co-operation agreement with Nissin Foods Holdings. 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. However, this agreement will only go live should Premier stay independent. Nissin has subsequently built a 19.9% stake in Premier, which, it emerged, told the Japanese group about McCormick’s interest before the noodle maker invested in the group.
In its statement today, Premier said its management plans to meet its “main institutional investors” to discuss the company’s planned initiatives “over the next few days”. The company provided a copy of the presentation it plans to make to shareholders, in which it is set to talk about the plans it has for its three divisons – sweet treats, grocery and international.
Premier also plans to give investors more details on its planned agreement with Nissin. Ideas Premier and Nissin have discussed include launching Nissin-type noodle under the UK group’s Batchelors brand.
Premier’s board and management came in for criticism from investors in the days after it revealed it had rebuffed McCormick’s interest and after potential distribution partner Nissin bought a stake in the company.
Standard Life Investments, the fund arm of insurer Standard Life, rebukeed Premier for rejecting the first two proposals for McCormick. It also expressed disappointment at Nissin buying a stake in the business.
US investment fund Paulson & Co., which owns just over 7% of Premier, said the Mr Kipling maker appeared “to be favouring Nissin Foods … to the detriment of all other shareholders”. It called on Premier to “fully engage” with McCormick” and “proactively solicit other offers for the whole company, including from Nissin Foods”.