McCormick & Co., Inc. MKC has announced that it is raising the bid to acquire British food manufacture Premier Foods PLC by 25%, calling on the Premier Foods’ board to engage in talks that could lead to a recommended offer.
The U.S.-based spice maker McCormick had approached Premier Foods twice, first in February and then again in March, but the latter rejected the offer and instead joined forces with Japan’s Nissin Foods Holdings Co., which has now become Premier's largest shareholder.
Premier Foods said McCormick's possible cash offers of 52 pence a share in February and 60 pence a share represented an insufficient premium to its enterprise value.
McCormick’s revised proposal of 65 cents values Premier Foods at an Enterprise Value of approximately £1.5 billion and represents a 106% premium to Premier Foods’ earlier share price of 31.5 pence.
The company expects the new offer to please Premier Foods' shareholders, employees, pensioners, creditors, and other stakeholders.
McCormick, known for its spices and Lawry's seasonings, is now required to make a firm offer for Premier under British takeover rules by Apr 20. McCormick is willing to proceed with limited confirmatory due diligence that only comprises a review of pensions documentation, current trading and material contracts. However, there is still no certainty that a firm offer will be made.
If it moves ahead with the acquisition, McCormick expects to gain from Premier Foods’ range of mainstream grocery brands that are slow-growing but profitable.
McCormick has a Zacks Rank #3 (Hold).
Better-ranked players in the food industry include Campbell Soup Company CPB, Post Holdings, Inc. POST and Sysco Corp. SYY. While Campbell Soup and Post Holdings sport a Zacks Rank #1 (Strong Buy), Sysco holds a Zacks Rank #2 (Buy).
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