McCormick abandoned its bid after studying Premier’s books, as part of a due diligence review.
The US business said in a statement: “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.
‘Withdrawn its proposal’
“Accordingly, McCormick has withdrawn its proposal to acquire Premier Foods.”
But the firm praised Premier’s “open and collaborative spirit”, after previously complaining that the UK firm had obstructed its attempts to gain a clear picture of the business, including its pension liability, assets and prospects.
Premier Foods’s board acknowledged McCormick’s decision, while insisting it had “engaged extensively” with McCormick to supply the information requested.
Management at Premier added: “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 had a valuable portfolio of market leading brands, extensive distribution across key retail channels, a well-invested manufacturing base and strong operational cash flows, it said.
The business planned to accelerate growth by executing its recently announced new strategic initiatives. The plan would exploit both the firm’s existing capabilities, infrastructure and brand equity, as it expanded into new formats, channels and markets, it said.
New formats, channels and markets
Also, Premier’s recent deal with instant noodle manufacturer Nissin Foods Holdings would expand Premier Foods’s range of growth opportunities, it claimed.
Nissin acquired a 17.27% stake in Premier Foods last month. Premier has described the Japanese firm as a long-term shareholder. The new partnership would allow Premier to grow sales both at home and abroad, said the board.
Meanwhile, McCormick’s decision ends a two-month bidding process for Premier, in which the UK manufacturer continually insisted that the US firm’s three bids “significantly undervalued” its share value. (See box below).
McCormick achieved annual sales of £3.03bn ($4.3bn) from the manufacture and sales of spices, seasoning mixes, condiments and other products. Key brands include Schwartz spices and Lawry’s seasonings.
What McCormick was willing to pay for Premier Foods
McCormick made three bids for Premier:
- 52p a share: February 2016
- 60p a share: March 2016
- 65p a share: March 2016
Premier judged all three bids significantly undervalued its business.