McCormick, the US food group hoping to buy Premier Foods, has reaffirmed its case for buying the company, saying the Mr Kipling and Bisto gravy owner had some “fantastic brands” that would complement its spice and flavour business and help build on its expansion in the UK.
In a first quarter trading update presentation today, the company gave little indication of its next move after Premier rebuffed its second takeover bid, worth £496m, last week.
However president and chief executive Lawrence Kurzius reiterated its reasons for wanting to buy the company: “What is attractive is that [Premier] is still predominantly a flavour business with some iconic brands that are much loved in the UK.”
“Our business is not just spices…and we see the brands in the Premier portfolio as very complementary to the flavour business that we have and are building globally,” he told analysts on the call.
Kurzius also played down concerns raised over the strength of the UK food market, saying: “One of the things we are interested in as part of acquisition programme is adding scale where we already have business presence and we already have a strong presence [in the UK] through our Schwarz business. It is also the base of our EMEA business and so we have the structural resources there to handle an asset like [Premier].”
He conceded that while larger than some of the bolt-on acquisitions McCormick has completed in recent years, but said it has been “signalling for many months now” that it was looking for bigger opportunities.
The company ducked questions regarding the financial impact of the deal on the company, only to say that it expects any potential takeover to be beneficial to both Premier and McCormick shareholders.
Premier's shares have rallied by more than 11 per cent today amid further bid speculation, after chief executive Gavin Darby told the Daily Telegraph that rival bidder could challenge McCormick.
The group last week rebuffed the 60p per share offer from McCormick, saying it undervalued the company. Instead the group agreed a "cooperation agreement” with Japanese instant noodle-maker Nissin.
Nissin then proceeded to buy a 17.27 per cent stake in Premier Foods from private equity shareholder Warburg Pincus last Thursday.
Some of its top shareholders including Standard Life Investments and Paulson & Co criticised Premier Foods' handling of the takeover approach. David Cumming, SLI's head of investments said: "Although we believe the 60 pence 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."
Darby has defended its decision to reject the 60p per share bid as "a very good decision". He also rebutted claims by McCormick that it had failed to engage with its board, saying there had been numerous telephone conversations and emails.
McCormick has said it is prepared to increase its bid, but only after it has had access to Premier's books and examined its current trading performance and pension liabilities.