Mr Kipling and Bisto maker Premier Foods gets higher takeover bid from McCormick

The new proposal of 65 pence per share aims to break a stalemate that arose last week

Martinne Geller,Vidya L. Nathan
Wednesday 30 March 2016 12:02 BST
Premier Foods owns Mr Kipling and Bisto, among other brands
Premier Foods owns Mr Kipling and Bisto, among other brands

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Louise Thomas

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US spice company McCormick & Co raised its takeover proposal for Premier Foods Plc on Wednesday for the second time, calling on the British company's board to engage in talks that could lead to a deal.

The new proposal of 65 pence per share aims to break a stalemate that arose last week after Premier refused McCormick's prior offers of 52 and 60 pence per share and instead agreed to an international cooperation deal with Japanese noodle maker Nissin, sparking criticism from some Premier investors.

At 65 pence, McCormick is valuing Premier's equity at £537 million ($774 million). Including debt and future pension liabilities, McCormick says it represents an enterprisevalue of £1.51 billion.

The latest proposal is a little over double the stock's closing price on March 23, when the approach was made public.

Analysts at Shore Capital urged Premier's shareholders to accept the revised proposal.

“We see 65p as a good compromise price, allowing Premier's management to highlight the extra value it has extracted from McCormick, whilst also offering shareholders the opportunity of a cash exit today at a reasonably full EBITDA (core earnings) valuation,” they said in a research note.

They also downgraded their rating on Premier stock to “Hold” from “Buy” due to its jump in light of the proposal.

A spokeswoman for Premier said the company had no immediate comment on the proposal. The maker of Mr. Kipling cakes and Bisto gravy said last week it would “give careful consideration” to an improved offer that better reflected the board's assessment of the company's underlying value over the long term.

It said the previous approaches “significantly undervalued” it.

Premier's shares, which jumped nearly 9 percent in early trade to 61.5 pence, have been depressed by a large debt load and pension liabilities left over from an acquisition spree.

In addition to the deal with Nissin whereby the Japanese company will sell Premier's products overseas, Nissin bought 17.3 per cent of the company from private equity firm Warburg Pincus for 63 pence per share, becoming its largest shareholder.

This led some other major shareholders including Paulson & Co and Standard Life Investments, to criticise the objectivity of Premier's board.

McCormick said its revised proposal was based on “prompt and full engagement” by Premier's board and subject to limited confirmatory due diligence that comprises a review of pensions documentation, current trading and material contracts.

McCormick, known for its spices and Lawry's seasonings, has until April 20 to make a firm offer under British takeover rules.

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