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McCormick is not giving up on Premier Foods

The US spices group has made yet another upward revision to its offer price for Premier
March 30, 2016

Premier Foods' (PFD) shareholders have had a heady week. On Wednesday, US spicemaker McCormick (US:MKC) submitted its third bid of 65p per share for the group, following spurned offers of 52p and 60p. Premier's board continues to hold out for more, and hopes for an improved proposal following planned meetings with the US company*. As a result of this frenetic activity Premier's shares almost doubled in price over just a few days of trading.

IC TIP: Buy at 60p

There has also been fervent speculation over a possible rival bid from Japanese instant noodles-maker Nissin, which took a 17 per cent stakeholding in the group at the end of March.

David Beever, chairman of Premier, said at the time: "We have an exceptional opportunity to deliver shareholder value. Based on the conditional co-operation agreement we announced yesterday, we very much look forward to working with Nissin to develop ways our two businesses can co-operate to drive growth."

But news of the tie-up frustrated some Premier Foods investors, given the doubt it raised about an improved McCormick offer. Fund manager Standard Life Investments' head of equities David Cumming noted the 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," Mr Cumming said. He urged the board to pursue the option of a higher bid from McCormick, and has since received his wish.

Amid all this noise, Premier Foods felt compelled to clarify a statement made to the Daily Telegraph by chief executive Gavin Darby over any discussions between McCormick and private equity house Warburg Pincus over the stake which it eventually sold to Nissin. Mr Darby was "not aware, nor could he have been", of any such discussions, his company clarified.

The latest McCormick offer, which valued the company at 11 times pro-forma 2015 cash profits, is subject to Premier Foods providing documentation on current trading, material contracts, and its pension obligations.

*This article was updated on Wednesday after Premier Foods responded to the 65p per share offer