Big investors accuse Premier Foods of not trying on McCormick talks

Food-maker told to ‘proactively solicit’ better offers and engage with US bidder’s board

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The Independent Online

Premier Foods’ two largest independent investors ratcheted up the pressure on the Oxo-to-Sharwood’s food manufacturer to enter talks with its US suitor McCormick, criticising its board for the way it rejected advances from the herbs and spices specialist.

David Cummings, the head of Standard Life Investments, questioned the objectivity of Premier’s board and demanded it “engage with McCormick and pursue this option to the full”.

The New York hedge fund Paulson & Co also called on Premier to “proactively solicit other offers”, saying “only this course of action best fulfils the board’s fiduciary and statutory duties”.

Both investors admitted publicly that they were unhappy with the board’s decision on Wednesday to reject McCormick’s £490m cash approach, opting instead to agree on a tie-up with the world’s largest instant noodle maker, Nissin. While the Japanese company has ruled out a full takeover of Premier, it wasted no time snapping up a 17.3 per cent stake in the company at 63p a share, which was almost certainly bought from the food group’s long-term private equity shareholder Warburg Pincus.    

But investors are worried the agreement could deter potential bidders for Premier. It emerged on Wednesday that McCormick had made two offers for the UK group, at 52p a share and then again at 60p, a price Premier said “significantly undervalues the company and its prospects”. 

Mr Cummings said Standard Life agreed that 60p was too low, but was “open to a bid at a higher level”. He added: “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.”

A statement from Paulson meanwhile said: “The board has created an environment where they appear to be favouring Nissin Foods, which paid a significant premium to one shareholder, to the detriment of all other shareholders who were not offered any premium, and also to the detriment of other bidders who could be discouraged by Nissin Foods’ 17.3 per cent stake… The fact that the company’s long-standing and largest shareholder sold all their shares at 63p, shows that the 60p offer from McCormick should be worthy of engagement.”

Premier defended its actions, noting that McCormick’s bid was “non-binding and highly conditional”, but promising to carefully consider a better deal from any potential suitor. McCormick however accused Premier’s board of being “unwilling to engage constructively”, saying it had had only one face-to-face meeting with its chairman, on 12 February.

Premier shares, which jumped more than 70 per cent on Wednesday, fell 1.75p or 3 per cent to 52p.