30th Mar 2016 12:46
LONDON (Alliance News) - Premier Foods PLC on Wednesday once more said a higher offer made by McCormick & Co Inc undervalued the company but said it would enter talks with the US spices and flavourings maker on its offer.
McCormick tabled an increased, 65.00 pence per share offer for Premier Foods on Wednesday morning, valuing the maker of Mr Kipling cakes and Bisto gravy at GBP536.7 million. The new offer came after McCormick had seen two offers, of 52.00p and 60.00p, rejected by Premier as undervaluing the company.
Premier Foods shares were up 7.1% to 60.50p on Wednesday afternoon.
Premier, later on Wednesday, continued in that vein, saying its board believes the 65.00p per share offer also undervalues the business. However, Premier said it was prepared to hold meetings with McCormick on the offer.
Premier said the meetings would be held to discuss "value drivers, a review of material pensions documentation, current trading and material contracts" with a view to establishing whether McCormick will increase its offer further.
"It will also be important for McCormick to demonstrate to the board that any revised proposal is deliverable," Premier said, adding it has informed McCormick the US company will be expected to provide an improved proposal following the meetings.
McCormick on Wednesday called on Premier Foods to engage with the revised offer, arguing it provides shareholders with the opportunity of a cash exit from their holdings at a full valuation of the company.
"McCormick continues to believe 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 with or without the proposed co-operation with Nissin Foods," McCormick said in a statement.
Premier has faced criticism from major shareholders since the McCormick offer was unveiled over the timing of the sale of a 17% stake to Japanese noodle maker Nissin Foods Co Ltd which was announced just after the rejection of McCormick's advances.
Nissin acquired the stake from Warburg Pincus, the private equity firm, for 63.00p per share.
The shareholders - including Standard Life Investments, the asset management arm of blue-chip life insurer Standard Life PLC, and US hedge fund Paulson & Co - called on Premier's board to engage with McCormick on its offer, and Premier responded late last week, saying it would carefully consider an increased offer from McCormick.
Standard Life and Paulson both hold 7.0% stakes in Premier.
Paulson said last week that 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", adding that the stake sold to Nissin could deter other possible suitors from making bids.
Standard Life Investments, meanwhile, said last week it noted the timing of the Nissin stake purchase "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.
Cumming added he agreed with Premier the 60.00p offer was too low, but said it remained open to a bid at a higher level and expected Premier to engage with McCormick on its interest.
Premier and Nissin are also holding talks on the terms of a relationship agreement which would see a Nissin representative appointed to Premier's board, but last week Premier 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.
Premier Foods also published a statement clarifying comments made by Chief Executive Gavin Darby to the Daily Telegraph.
Darby told the newspaper: "The Premier Foods board feel very confident that rejecting 60p was a good decision. Warburg Pincus took the opportunity of selling their shares and chose to sell their shares to Nissin Foods. Just as much as it could have been a deal between Warburg Pincus and McCormick & Co. I'm sure all three of them were involved."
Premier Foods said Darby "was not aware, nor could he have been" of any talks between McCormick and Warburg Pincus.
"He was simply seeking to make clear, in response to a question from the journalist, that it would have been open to any party, including McCormick, at any time to approach Warburg Pincus with a view to purchasing all or part of their shareholding," Premier said.
By Sam Unsted; [email protected]; @SamUAtAlliance and Karolina Kaminska; [email protected] @KarolinaAllNews
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