Premier rejects McCormick, embraces Nissin

25 Mar 2016

Premier Foods has rejected two offers from American herbs and spices company McCormick to acquire the company, but entered into a co-operation agreement with Nissin that sees the latter acquire 17.27% of its shares.

Premier rejects McCormick, embraces Nissin

Premier Foods has announced that it received an unsolicited approach from McCormick in February to acquire the company for 52 pence per share, and that the approach was rejected on the basis that it significantly undervalued the company and its prospects. Premier received a subsequent approach from McCormick for 60 pence per share in March. This approach was also rejected for the same reason.

“McCormick’s Proposal represents an attempt to capture the upside value embedded in Premier’s business that rightfully belongs to Premier’s shareholders,” said David Beever, Chairman of Premier. “The Proposal fails to recognise the value of Premier’s performance to date and prospects for the future, including the strategic plans we have to accelerate growth. McCormick's Proposal significantly undervalues the business and the board has unanimously decided to reject it.”

The company said that it sees a strong future for an independent Premier and believes that the foundations have been laid for significant growth and shareholder value creation. Premier believes it has a strong and valuable portfolio of market leading brands, extensive distribution across key retail channels, a well-invested manufacturing base and strong operational cash flows.

Since 2014, the company said it has more than doubled its rate of new product innovation, launching a wide range of new products, packaging formats and line extensions to meet changing consumer trends. Premier expects to increase significantly its investment in consumer marketing from approximately £25 million in the 2013/14 financial year to approximately £36 million in the 2015/16 financial year.

The Company has additionally identified a number of new strategic initiatives to help accelerate growth across its three business units of Grocery, Sweet Treats and International. Whilst these initiatives are expected to incur initial upfront investment of £2-4 million in the full year 2016/17, the company is now raising its sales growth guidance for the medium term from 1-2% to 2-4%.

Premier said that the new initiatives will leverage the company’s existing platforms, infrastructure and brand presence to expand further into new formats, channels and markets:

The company also said that, over recent years, Premier has discussed a number of potential strategic opportunities with Nissin and has now agreed to enter into a co-operation agreement which will see Nissin acquire 17.27% of Premier’s shares.

With annual revenues of around $3.8 billion and operating profit of around $216 million, Nissin, which invented the world’s first instant noodles in 1958, operates in 19 different countries, spanning Asia Pacific, the Americas, Europe, Middle East and Africa. It is said to be a global leader in instant noodles holding the number one or two positions in key markets, including Japan, the United States and Brazil and has a growing presence in chilled and frozen foods, cereal-based confectionery and yoghurt beverages in Japan. Nissin’s presence in Europe includes Hungary, Germany and Spain, with brands such as Cup Noodles, Soba and Top Ramen. It also benefits from a state-of-the-art global research and innovation centre in Japan that develops more than a thousand new products that are distributed around the globe every year and has significant expertise in starch technologies, sodium reduction and production techniques.

Premier said that the new strategic partnership has the potential for significant long-term value creation for both organisations.

"This is an exceptional opportunity for us to gain a major strategic partner which understands our business and supports our growth ambitions,” said Darby. “We look forward to working with Nissin to explore ways our two businesses can co-operate to better serve both our customers and our shareholders."

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