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McCormick make third offer for Premier Foods

Sweetening the deal has brought Premier Foods to the table, but the maker of Bisto gravy and Mr Kipling’s cakes has told its American suitor that it must offer more than 65p a share if any takeover is to succeed.

The British food manufacturer said yesterday that it had received a third offer of 65p a share from McCormick & Co, which makes spices and flavourings. It was a 5p increase on the previous offer, which Premier snubbed in a rejection which infuriated some of its investors.

Although Premier insisted that McCormick’s third offer “continues to undervalue Premier and its prospects”, the company has bowed to pressure and agreed to hold meetings with its much bigger US rival.

Premier said that it wanted any discussions to focus on “value drivers, a review of material pensions documentation, current trading and material contracts, and so to establish whether McCormick will increase its offer price to a recommendable level”.

The foods group, which also makes Sharwood’s sauces and Ambrosia custard, said it was important that McCormick was able to “demonstrate to the board that any revised proposal is deliverable”.

In a statement to the stock exchange, Premier added: “Generating shareholder value remains the board’s key focus. There can be no certainty that any offer will be made, nor the terms on which any such offer might be made.”

McCormick’s latest offer values Premier at £537 million, or £1.5 billion on an enterprise value basis, which includes debt and pension liabilities. The group, best known in the UK for its Schwartz brand of seasonings, said that it wanted Premier to “engage fully” in order to agree a recommended offer, which would allow all shareholders the chance to exit in an all-cash deal.

The American group, which is valued at $12 billion, said: “McCormick continues to believe 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 with or without the proposed co-operation with Nissin Foods.”

The Japan-based Nissin Foods stunned the market when it struck a deal to buy Warburg Pincus’s 17.3 per cent stake in Premier at 63p a share.

Two of the biggest shareholders in Premier have criticised the group for failing to engage with McCormick and have questioned the board’s objectivity. Standard Life and Paulson & Co, which between them own more than 14 per cent of Premier, also were dismayed at the timing of Premier’s co-operation agreement with Nissin.

Some investors fear that Nissin is trying to thwart McCormick. Since its deal with Warburg, which will go ahead only if there are no other agreed offers for Premier, Nissin has lifted its shareholding to nearly 20 per cent.

Yesterday Gavin Darby, chief executive of Premier, clarified remarks he had made which had implied, mistakenly, that there had been discussions between McCormick and Warburg.

Darren Shirley, an analyst at Shore Capital, said that McCormick’s latest offer was a “good, compromise price”, which shareholders should accept.

Shares in Premier rose 2½p to 59p.

Source: - 31 March 2016