Mr Kipling owner Premier Foods rejects third approach by McCormick

By Vince Bamford

- Last updated on GMT

Premier Food's Mr Kipling is the largest UK cake brand, according to IRI
Premier Food's Mr Kipling is the largest UK cake brand, according to IRI

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Mr Kipling owner Premier Foods has rejected a third takeover bid by McCormick & Company but has said it is prepared to have talks with the US flavors business.

UK manufacturer Premier, which also makes Cadbury cakes under licence, has said a revised proposal of £0.65 ($0.94) a share made by McCormick today "continued to undervalue Premier and its prospects​".

Premier has already rejected two takeover approaches made by McCormick this month - one at a suggested price of £0.52 ($0.74) per share and the second at  £0.60 ($0.85).

Some shareholders had subsequently criticized the UK business - which also produces brands including Bisto gravy and Sharwood’s cooking sauces - for not giving McCormick’s earlier offers sufficient consideration. At the time, Premier stated it would give an improved proposal “careful consideration and evaluate its merits, having regard to the best interests of all of its shareholders, employees and other stakeholders".

And today it said its board would be prepared to meet with McCormick in order to "discuss value drivers, a review of material pensions documentation, current trading and material contracts, and so to establish whether McCormick will increase its offer price to a recommendable level​".

It added: "There can be no certainty that any offer will be made nor the terms on which any such offer might be made​." 

When suggesting the £0.65 price today, McCormick pointed out this was more than twice the 31.5p ($0.45) shares had been priced at before the earlier approaches were announced by Premier on March 23.

'Should be well received'

McCormick believes that this revised offer should be well received by Premier Foods' shareholders, employees, pensioners, creditors, and other stakeholders​,” said the US business in a statement issued this morning. “McCormick continues to believe that, with its 127 year heritage, it would be an outstanding custodian for the Premier Foods brands, and, with the strength of its balance sheet, can provide benefits for Premier Foods, its pensioners, creditors and other stakeholders, which Premier Foods' current capital structure cannot deliver​.”

The £0.65 offer puts Premier Foods’ enterprise value at £1.5bn ($2.2bn) and is 10.6 times Premier’s pro-forma 2015 EBITDA.

Sales up 7% year on year

News of the revised offer came the day after McCormick announced a 7% year on year increase in sales at constant currency rates in its results for the first quarter of its financial year.

Speaking on a call to analysts, McCormick president and chief executive officer Lawrence Kurzius yesterday conceded that some Premier brands were not – on the face of it - core to the McCormick business.


But I’d remind you we have a desserts business on the Continent and a fairly good part of our US business is built on baking products as well​,” he said. “We feel pretty good about the fit​.”

Premier last week said it would accelerate expansion of its cake brands in the US and other geographies. This site has previously reported​ that Premier had doubled Mr Kipling sales in Australia in 2015, and had taken the brand into The Czech Republic, Slovakia and Poland at the end of last year.

Iconic brands in UK

Kurzius added that what attracted McCormick to the UK company was that it was primarily a flavors business with some “terrific, iconic flavor brands in the UK​” such as Bisto, Oxo [stock], Saxa [condiments] and Sharwood’s.

These are fantastic brands that are much-loved by UK consumers​,” he said, adding that the McCormick business also included cooking sauces.

This morning, Shore Capital analyst Darren Shirley suggested £0.65 was a “good compromise price​”, and that stakeholders accept the offer.

It allows Premier’s management to highlight the extra value it has extracted from McCormick, whilst also offering shareholder’s the opportunity of a cash exit today at a reasonably full EBITDA valuation rather than waiting for the chance of a higher price through operational improvement​,” he said.

Premier Foods has not commented on the revised offer.

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