24th Mar 2016 13:50
LONDON (Alliance News) - Food company Premier Foods PLC on Thursday came under fire from a major institutional shareholder following its sale of a stake to Japanese noodle maker Nissin Foods Holdings Co Ltd a day after it revealed it rejected two takeover offers from US-based McCormick & Co.
Standard Life holds a stake of around 7.0% in Premier Foods, whose shares were down 5.5% to 50.77p on Thursday afternoon.
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.
Based on Premier's current market capitalisation, the Nissin stake would be worth around GBP68.8 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.
On Thursday, however, Standard Life Investments, the asset management arm of blue-chip life insurer Standard Life, 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.
By Sam Unsted; [email protected]; @SamUAtAlliance
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