US suitor spices up pursuit of Premier Foods with £537m bid

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US spice-maker McCormick upped the stakes again today in its attempt to woo Mr Kipling cakes firm Premier Foods, making a third offer for the company worth £537 million.

The latest 65p-a-share proposal for the Ambrosia custard-to-Bisto gravy maker puts a £1.5 billion enterprise value on the company. It comes after the board revealed it had rebuffed two offers from McCormick of 52p and 60p per share which “significantly” undervalued the company.

McCormick, known for its Schwartz dried spices, called on the board “to now engage fully with McCormick to agree a recommended offer, which will offer all shareholders the opportunity of a cash exit at a full valuation of the company”.

But last week Premier, headed by Gavin Darby (pictured), also unveiled an alliance with Japanese noodle maker Nissin which agreed to buy a 17.3% stake in the firm, making it the company’s biggest shareholder. 

This led to criticism from other major investors, such as Standard Life, which noted “with some dismay” the timing of the Nissin acquisition. Hedge fund Paulson & Co also questioned the board’s objectivity, saying it was favouring Nissin — which paid 63p a share — to the detriment of other shareholders. 

McCormick said it “would be an outstanding custodian” for Premier Foods and offer opportunities for expansion from a stronger balance sheet. 

Premier Foods — which was forced to retrench after a debt-fuelled expansion before the financial crisis — did not comment on the latest approach today. But the City was sweet on the update, and its shares rose by nearly 4p to 60.39p.

Darren Shirley, an analyst at Shore Capital, told the Standard: “This is a real opportunity to realise a 100% premium on where the shares  were recently.”

He added that a takeover would aid expansion potential: “Premier Foods remains somewhat constrained by its pension exposure and the ongoing cash requirements, so being part of a bigger organisation may give it the resources to help it develop its brands further and to make pension trustees sleep easier at night.”

Combined, the companies would control 47 brands, including a host of household names. If successful it will be the sector’s biggest acquisition since Kraft’s takeover of Cadbury in 2009.

Source Article from http://www.standard.co.uk/business/business-news/us-suitor-spices-up-pursuit-of-premier-foods-with-537m-bid-a3214086.html

March 31, 2016 |
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