Premier Foods plc today (24 March) insisted its board would assess “improved proposals” to buy the Bisto gravy maker after rebuffing two approaches from Mccormick & Co., the US spices and sauces maker, in the last month.
The announcement came after Standard Life Investments, the fund arm of insurer Standard Life and a shareholder in Premier, criticised the UK group for rejecting the two proposals for McCormick. It also expressed disappointment at news Nissin Foods Holdings, the Japanese group with which Premier is looking to co-operate in areas such as distribution and innovation, has bought a stake in the business.
“We note with some dismay the timing of Nissin ‘s acquisition of a stake in Premier Foods. In our view, this does not reflect well on the Premier Foods board’s objectivity and commitment regarding its engagement with McCormick and consequently its desire to pursue maximum value for shareholders,” David Cumming , head of equities at Standard Life Investments, said.
In a stock exchange announcement this afternoon, Premier’s board repeated its belief McCormick’s second proposal – made last week at 60p per share – was “highly conditional” and “significantly undervalues the company and its prospects”.
However, the board added: “However, should McCormick, or any other bona fide potential offeror, come forward with an improved proposal that better reflects the board’s assessment of the company’s underlying value over the longer term, the board would give such offer careful consideration and evaluate its merits – including the level of conditionality – having regard to the best interests of all of its shareholders, employees and other stakeholders.”
Premier revealed the two approaches from McCormick yesterday. It said McCormick had made its first approach in February, putting forward a proposed bid worth 52p a share. McCormick returned on 14 March with the 60p-a-share proposal. Alongside news of the McCormick interest, Premier outlined plans for a “co-operation agreement” with Nissin.
In the wake of the announcements. Premier’s shares closed yesterday at 53.9p, a jump of over 71% during the day. After news of Nissin’s shareholding in Premier emerged, the Ambrosia custard maker’s stock dropped to 42p. At 15:01 this afternoon, the shares had risen to 54.43p.
At Standard Life, which owns around 7% of Premier, Cumming agreed McCormick’s second proposed offer was “too low” but added: “We remain open to a bid at a higher level. We expect the Premier Foods board, on behalf of its shareholders, to engage with McCormick and pursue this option to the full.”
Nissin paid US private-equity firm Warburg Pincus 63p a share for its stake in Premier.
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.
McCormick has, at the time of writing, made no comment today. Yesterday, after Premier revealed McCormick’s interest, the Schwartz and Ducros owner insisted its proposal “should be well received” by the UK group’s investors.
McCormick said the second proposal reflected “a substantial premium to all relevant recent Premier Foods share price metrics”. The 60p-per-share approach represented a 90% premium to Premier Foods’ 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.”