Premier Foods' third biggest shareholder has slammed the company for failing to recommend McCormick's 65p per share offer to the board, after its American suitor walked away today.
Paulson & Co, a US hedge fund that owns a seven per cent stake in Premier and has already locked horns with the company over its handling of the bid, said it has "expressed its disappointment" to the board.
A spokesperson for the fund manager said: "[It is] extremely disappointing that the board could not recommend an offer at a 106 per cent premium to the pre-announcement price."
The maker of Mr Kipling cakes and Ambrosia custard rejected the third bid from the US maker of Schwartz spices last month but agreed to open its books after coming under fire from several top investors including Paulson and Standard Life Investments for not engaging with the company.
However, talks with McCormick have ended within less than two weeks, with the US spice maker today saying that after careful consideration, it would not be able to offer a price that would be recommended by Premier's board "while also delivering appropriate returns for McCormick shareholders".
Shares in Premier closed down by more than 25 per cent today as a result.
The company said in a statement: "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."
Premier has maintained that it can create further value for shareholders and recently revised its sales guidance for the medium term from one to two per cent previously indicated to between two and four per cent.
"The board also considers that the company's longer-term prospects will be enhanced by the co-operation agreement it has signed with Nissin Foods Holdings."
The agreement with Japanese noodle maker Nissin was announced in February on the same day that it rejected McCormick's initial 52p per share bid. Nissin then subsequently bought a 17 per cent stake in Premier from private equity group Warburg Pincus for 60p per share.
The deal has been one of the main points of contention with shareholders. Paulson at the time said that Premier "appeared to be favouring Nissin," and the fact that the company's longstanding and largest shareholder sold all their shares at 63p, "showed that the 60p offer from McCormick should be worthy of engagement".
Investec analyst Nicola Mallard, said: "We agree the business was probably worth more than 65p to a bidder, but the UK market cannot get past the balance sheet issues when valuing Premier. Enhanced growth plans will help to improve cash flow, but debt pay down after funding the pension is still too slow for many mainstream investors to consider Premier as a suitable investment opportunity."