After proffering multiple offers for UK-based Premier Foods, U.S.-based spice company, McCormick announced it is walking away from negotiations and does not intend to pursue a potential acquisition.
After conducting due diligence in collaboration with Premier Foods’ management, McCormick states that it “would not be able to propose a price that would be recommended by the Board of Premier Foods while also delivering appropriate returns for McCormick shareholders.”
Premier Foods is holding to its plans for expansion both in new markets and geographic regions reports Bakery and Snacks, including entry into the U.S. market in both the fresh and ambient cakes and pies categories, expansion into the ‘on the go’ market in the UK, an expansion into chilled soups, pies and small meals, and the growth of its noodle business through its partnership with Japan’s Nissan.
Meanwhile, it is believed that McCormick’s inability to come to an agreement with Premier Foods will not preclude it from pursuing other UK acquisitions according to Food Dive. McCormick has been actively acquisitive over the past year, taking over One World Foods, Drogheria & Alimentari, and Brand Aromatics.
Originally published April 1, 2016:
McCormick Raises Bid for Premier Foods to £1.5 Billion
Maryland-based spice giant, McCormick has made a third offer for Premier Foods, raising its bid to 65 pence per share, or a value of £1.5 billion (US$2.2 billion) including debt, according to Fortune.
Premier Foods has agreed to re-open negotiations with McCormick just one week after Japan’s Nissan Foods agreed to acquire a 17.27% stake in Premier from private equity firm Warburg Pincus.
Although Premier Foods countered that the newest offer still undervalues the company and its potential, it has agreed to talks with McCormick after shareholders who were concerned that Premier was favoring the Nissan deal so as to stay independent, began pressuring the board to negotiate reports The Telegraph.
Following years of growth, brand-building, and expansion, Premier found itself carrying a significant debt load, leading the company to restructure. The group sold its Hovis bread business to U.S.-based Gores Group and pursued a £1.1 billion debt restructuring package according to The Telegraph while shifting its focus to its core brands and new product development and innovation. In addition, a wave of consolidation among the biggest players in the food industry is also putting pressure on the rest of the sector.
McCormick states in a company press release that it “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 with or without the proposed co-operation with Nissin Foods.”
This latest offer is 25% higher over its first offer of 50p per share made in February, and is more than twice the 31.5p Premier Food share price before the previous offers were made public on March 23, according to Bakery and Snacks, and is an offer that McCormick believes should be “well received by Premier Foods’ shareholders, employees, pensioners, creditors, and other stakeholders.”
Under the UK Takeover Code, McCormick has until April 20 to finalize the terms of the offer, which is dependent upon multiple factors including assurances about Premier’s pension deficit, reports Fortune.