The UK company's share price dropped by more than 30 per cent this morning to 39.74p.
Premier Foods, which owns Mr Kipling, had previously rejected three offers from McCormick.
But Premier announced last week that it would be meeting with shareholders after holding "constructive talks" with the American firm.
Giving up on its bid to buy Premier, McCormick said this morning that it had completed a due diligence review with Premier management in an "open and collaborative spirit".
Its statement said: "McCormick has, after careful consideration, concluded 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."
The UK company said in a statement this morning: "Premier Foods and its advisers have engaged extensively with McCormick to provide it with the information requested. The board appreciates the open and constructive spirit in which the engagement with McCormick was conducted.
"The board sees a strong future for an independent Premier Foods, and believes that the foundations have been laid for significant growth and shareholder value creation."
Last month, Premier's chief executive Gavin Darby was criticised by shareholders over his handling of the takeover talks with McCormick. Standard Life Investments urged the board to engage with the US spices giant, whose last offer valued the company at £1.5bn.
McCormick also put out a statement last month saying it was "disappointed" with the way the board of Premier was "conducting itself".
This came shortly after Premier announced Japanese instant noodle maker Nissin Foods had agreed to buy a 17.27 per cent stake in it from US private equity firm Warburg Pincus.