McCormick Withdrew From Premier Foods Acquisition, Bid Too Pricey
McCormick has deserted the talks regarding the takeover of Premier Foods Plc on Wednesday. The spice maker said that the amount the company is requesting will not be profitable to its own shareholders after a study of Premier's finances.
The unsuccessful discussion now puts pressure on Premier Chief Executive Officer Gavin Darby to deliver growth for shareholders, particularly that the company is still burdened with a deficit-laden employee pension program. After balking McCormick's initial dealings, Premier made an alliance with Japan's Nissin Foods Holdings Co with Nissin taking a share in the U.K. company that made the shareholders object and persuade Premier to stick with its U.S. prospect, according to a Bloomberg report.
"This is a blow for Premier Foods shareholders, but also for members of the pension scheme who would have been hoping for resolution of a decade of significant underfunding," said Robert Lawson, co-founder at consultants Food Strategy Associates. "The board will no doubt face questions from shareholders and trustees alike as to how they let McCormick get away."
McCormick had decided that it will not be able to make a bid satisfying to Premier Foods. The US spice maker had an initial offer of 52p a share which was rejected in February and then raised its offer to 65p a share on the 30th of March.
Based on McCormick's statement, the company "completed its due diligence review of Premier Foods" which was conducted "in an open and collaborative spirit". It added that "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," as quoted by BBC.
McCormick's move made Premier Foods to boost its own plans, including cooperation with Nissin Foods, a Japanese noodle making company. Premier Foods in turn said that they see a strong future for an independent Premier Foods and they believe that the foundations have been prepared for important growth and developing shareholder value, as reported by Reuters UK.
McCormick is known for its different spices, gravy mixes and cooking sauces to name a few while Premier Foods is famous for its Mr. Kipling cakes and Bisto gravy. Premier's share price went down as much as 31% after McCormick abandoned the acquisition talks.