24th Mar 2016 14:04
LONDON (Alliance News) - Premier Foods PLC on Thursday said it is open to considering a higher takeover offer from US spices and flavourings producer McCormick & Co, following criticism from a major shareholder over its decision to sell a stake to Japanese noodle maker Nissin Food Co Ltd while refusing to engage with McCormick.
Premier Foods said that while it still reiterates its rejection of the 60.00p per share offer from McCormick, it would give careful consideration and evaluate the merits of a higher bid, should one materialise.
Earlier Thursday, Premier Foods, which makes Bisto gravy and Mr Kipling cakes, agreed to sell a 17% stake to Nissin, the investor of instant noodles, and work towards reaching a relationship agreement which would likely result in a Nissin representative being appointed to Premier's board.
It sold the stake at 63.00 pence per share to Nissin, giving the transaction a value of around GBP88.4 million.
The move came a day after Premier revealed it had rejected the advances of McCormick & Co, the US spices and flavourings giant which owns the Schwartz brand.
Premier Foods said Baltimore, Maryland-based McCormick made a highly conditional approach at an indicative price of 52 pence per Premier share in cash in February. Premier rejected that bid on the basis is "significantly undervalued" the group and its prospects. That first bid valued Premier at around GBP429.4 million.
McCormick then returned with a second offer of 60p per share in cash, which Premier rejected for the same reasons, adding it did not think the proposal tabled by McCormick would be in the best interests of the company or its shareholders. The second bid valued Premier at GBP495.5 million.
"McCormick's proposal represents an attempt to capture the upside value embedded in Premier's business that rightfully belongs to Premier's shareholders. The proposal fails to recognise the value of Premier's performance to date and prospects for the future, including the strategic plans we have to accelerate growth," said Premier Chairman David Beever.
But just prior to Premier Foods' statement Thursday that it would engage with McCormick on a higher offer, Standard Life Investments, the asset management arm of blue-chip life insurer Standard Life, which holds a 7.0% stake in Premier Foods, said it noted the timing of Nissin's acquisition of a stake in Premier Foods "with some dismay".
"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," said David Cumming, head of equities at Standard Life Investments.
"Although we believe the 60p bid indicated by McCormick is too low, 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," Cumming added.
Premier Foods shares were down 5.3% to 50.93p.
By Sam Unsted; [email protected]; @SamUAtAlliance
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