23rd Mar 2016 11:32
LONDON (Alliance News) - Shares in food producer Premier Foods PLC jumped on Wednesday after it disclosed two takeover approaches had been made by US spices and herbs manufacturer McCormick & Co, though both were rebuffed.
Premier also said it has signed a cooperation agreement with Japanese noodle maker Nissin Foods Holdings Co Ltd and affirmed its expectations for the full year.
Shares in Premier Foods, which makes Bisto gravy and Mr Kipling cakes, were up 62% to 50.94 pence midday Wednesday, the best performer in the FTSE All-Share by some distance. At its current share price, Premier Foods has a market capitalisation of GBP421 million.
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.
"McCormick's proposal significantly undervalues the business, and the board has unanimously decided to reject it," he added.
Premier Foods conceded the offer was at a significant premium to its share price prior to Wednesday's gains, but argued the offer premium was not sufficient when considered in terms of Premier's enterprise value. In addition, the group said the implied enterprise value-to-earnings multiple of McCormick's offer does not reflect Premier Foods' robust prospects.
Premier Foods said it has identified a series of initiatives to drive further growth across the business and raised its medium-term sales guidance to 2% to 4% growth from 1% to 2% previously. This will include growing its Cake-to-Go range, an extension of its brands into premium areas of the chilled grocery sector and an acceleration of international growth.
Premier also said trading for the 52 weeks to April 2 has been in line with its expectations, leading it to affirm its outlook for the full year. It will publish its final results on May 17.
The company also said it intends to write-off its remaining investment in Hovis Holdings Ltd, the sliced bread maker, and will seek to acquire the 51% of Knighton Foods Ltd it does not already own after concluding a joint venture structure was not the best way for Premier to hold its investment.
Meanwhile, Premier Foods also said it has entered into a cooperation agreement with Nissin Foods, which invented instant noodles in 1958. Under the agreement, which is conditional on Premier no longer being subject to an offer period under the Takeover Code, Premier will get access to distribute Nissin products in the UK, and will see its products distribution by Nissin globally.
Premier also said it considering entering into a relationship agreement with Nissin which would include giving the Japanese company the right to appoint a non-executive director to Premier's board should Nissin buy a stake in Premier. Nissin has confirmed to Premier it does not intend to make an offer for the company in the next six months.
"This is an exceptional opportunity for us to gain a major strategic partner which understands our business and supports our growth ambitions. We look forward to working with Nissin to explore ways our two businesses can cooperate to better serve both our customers and our shareholders," Premier Foods Chief Executive Gavin Darby said.
By Sam Unsted; [email protected]; @SamUAtAlliance
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