24th Mar 2016 19:19
LONDON (Alliance News) - McCormick & Co Inc, the US spices and flavourings producer, on Thursday said it is willing to consider increasing its offer for Premier Foods PLC, the London-listed maker of Bisto gravy and Mr Kipling cakes.
McCormick's statement came after Premier had said it would be willing to consider a higher bid from McCormick, a shift in attitude which followed criticism from two major shareholders over the company's unwillingness to engage with the bid before then pursuing the sale of a 17% stake to Nissin Foods Co Ltd, the Japanese noodle maker.
In a statement, McCormick said it wants to review material pensions documentation, current trading and material contracts to help it decide whether to make a new, higher bid.
McCormick said it could increase its offer to above the 60.00 pence per share bid previously rejected by Premier Foods "if justified following its confirmatory due diligence".
"McCormick believes 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," the US spices and flavourings producer said.
The would-be acquirer urged shareholders in Premier Foods to "encourage" the target's board to "engage fully" with McCormick.
McCormick said that Premier Foods has been "unwilling to engage constructively".
Earlier Thursday, Premier Foods said it is open to considering a higher takeover offer from McCormick, though reiterated its view the 60.00p offer undervalued the company.
The altered stance came after criticism from two shareholders over Premier's decision to work with Japanese noodle maker Nissin whilst refusing to engage with McCormick.
On Thursday morning, Premier said Nissin had acquired a 17% stake in the company from its largest shareholder, private equity company Warburg Pincus, for 63.00p per share. In addition, Premier and Nissin are holding talks on the terms of a relationship agreement which would see a Nissin representative appointed to Premier's board.
On Wednesday, though, Premier had said, amid its rejection of the McCormick offers, that Nissin has confirmed it has no intention of making an offer to acquire Premier Foods in the next six months.
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.
Standard Life's criticism of Premier Foods was followed by similar concerns raised by US hedge fund Paulson & Co, which also owns a 7.0% stake in Premier.
Paulson, run by prominent hedge fund manager John Paulson, said Premier's board "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."
In addition, Paulson said the 17% stake Premier has sold to Nissin could deter other possible suitors from making bids.
Paulson said it informed Premier Foods Chairman on Wednesday that the company should "fully engage" with McCormick over its offer and should "proactively solicit other offers for the whole company", including from Nissin.
Paulson also said the fact Warburg Pincus had accepted a 63.00 pence per share offer for its stake illustrated the bid made by McCormick "should be worthy of engagement."
In addition, Paulson said Premier's refusal to engage with McCormick, a company with a market value of USD12 billion and with far greater resources to safeguard the pension obligations of Premier's employees, "is also detrimental to employees and pensioners."
Shares in Premier Foods closed down 3.3% to 52.00 pence on Thursday.
By Samuel Agini; [email protected]; @samuelagini and Sam Unsted; [email protected]; @SamUAtAlliance
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