McCormick still pining for Premier

by Monica Watrous
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Pinnacle portfolio - Cadbury Cakes, Bisto gravy, Sharwood Asian cuisine, Oxo stock, Ambrosia frozen custard
Premier’s stable of brands includes Bisto gravy, Oxo stock, Ambrosia frozen custard, Sharwood’s Asian cuisine and Cadbury cakes.

SPARKS, MD. — McCormick & Co., Inc. has sweetened its bid to buy Premier Foods P.L.C., which last week rejected the flavor company’s acquisition offer of 60 pence per share.

On March 30, McCormick raised its offer to 65 pence per share, which values the company at approximately £1.51 billion ($2.17 billion) and represents a 106% premium to the pre-announcement Premier Foods share price of 31.5 pence and an implied exit multiple of 10.6x pro forma 2015 EBITDA.

Although it said the revised proposal continues to undervalue the company, St. Albans, U.K.-based Premier, a maker of sweet goods, cooking sauces, flavors and seasonings, and soups, said it is prepared for meetings to take place “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.”

During an earnings call the day before, McCormick made a case for why Premier remains a strategic fit for its portfolio.

Lawrence Kurzius, McCormick
Lawrence Kurzius, president and c.e.o. of McCormick

“First of all, as we look at the Premier business, we are pretty limited in what we can say, but I can tell you that what is attractive to us about this business is that it is still predominantly a flavor business with some terrific iconic flavor brands that are much loved in the U.K.,” said Lawrence Kurzius, president and chief executive officer of McCormick. “Our flavor portfolio on the consumer side is not just herbs, spices and seasonings. We have sauces in many parts of the world. We are launching cooking sauces in North America. We have over the last few years. And so, we see the brands in the Premier portfolio as being very complementary to the flavor business that we have and are building globally.”

Premier’s stable of brands includes Bisto gravy, Oxo stock, Ambrosia frozen custard, Sharwood’s Asian cuisine and Cadbury cakes.

McCormick Vahine dessert brand - Asia
McCormick has a strong presence in the dessert category with its Vahine brand.

“So there are some brands that are not on their face core to our business, but I'd remind you we have a strong dessert business on the continent with homemade dessert products through the Vahine brand and a fairly good part of our U.S. business is based on cooking and baking, baking products anyway, as well,” Mr. Kurzius said. “So, we feel pretty good about the fit. It is bigger than the bolt-on acquisitions that we have done so many of. And I think we’ve been signaling really for several months now that we were going to look at some bigger opportunities in addition to the bolt-on opportunity. This would use a fair bit of our financial capacity, but it wouldn’t take us out of the market to do the kind of strategically important bolt-ons that we might have done otherwise.”

Additionally, Mr. Kurzius said the Premier acquisition would strengthen McCormick’s presence in the United Kingdom, where he said the company markets its Schwartz brand of recipe mixes, sauces, spices, herbs and gravies.

“It’s also the home of our EMEA business; our EMEA regional headquarters is in the U.K.,” Mr. Kurzius said. “So we have substantial infrastructure and resources there to handle an asset like this.”

McCormick Schwartz brand spices - U.K.
McCormick markets its Schwartz brand in the United Kingdom.

Premier is just one idea in McCormick’s “robust acquisition pipeline,” Mr. Kurzius said.

“We believe our offer is highly attractive for Premier Foods’ shareholders and an opportunity to build value for McCormick’s shareholders,” he said. “At this stage, given U.K. regulatory restrictions, we are limited in what we can say beyond our recent announcement. Consistent with our acquisition strategy, we will be disciplined about returns and value creation for McCormick shareholders.”

A day after rejecting McCormick’s offer of 60 pence per share, Premier Foods on March 24 announced a smaller deal with Tokyo-based Nissin Foods Holdings Co., Ltd., which agreed to acquire a 17.27% shareholding in Premier from an existing shareholder.
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