Premier Foods agrees to meet McCormick after improved offer

Britain's Premier Foods yesterday agreed to hold talks with McCormick & Co after the US company raised its takeover proposal for a second time, pushing for a deal that would boost its stable of kitchen cupboard brands.

McCormick raised its takeover proposal to 65 pence per share, aiming to break a stalemate after Premier refused its offers of 52p and 60p per share and instead agreed to an international cooperation deal with Japanese noodle-maker Nissin, sparking criticism from some Premier investors.

The new proposal values Premier’s equity at £537 million (€682 million). Including debt and future pension liabilities, McCormick said it represented an enterprise value of £1.51 billion.

Premier said the proposal was still too low, but it was prepared for meetings to provide McCormick with the limited financial information it is seeking, to establish whether the US firm would increase its offer to “a recommendable level”.

A deal would marry British brands such as Mr Kipling cakes, Bisto gravies and Oxo seasonings with McCormick's spices, Lawry's seasonings and Thai Kitchen meals.

While many of the brands are complementary, the merger would also likely aim to boost profits by streamlining, a strategy at work in last year's creation of Kraft Heinz Co and one becoming increasingly important amid a global slowdown in sales of packaged foods as consumers seek healthier options.

Shore Capital analysts urged Premier shareholders to accept the revised proposal, which is a little over double the stock’s closing price on March 23rd, before the approach was made public.

“We see 65p as a good compromise price, allowing Premier’s management to highlight the extra value it has extracted from McCormick, whilst also offering shareholders the opportunity of a cash exit today at a reasonably full Ebitda valuation,” they said. – (Reuters)