The chief executive of the takeover target Premier Foods has claimed a rival bidder could challenge its American suitor McCormick, as he defended the company’s heavily criticised decision to reject a 60p per share offer.
Gavin Darby told The Daily Telegraph there was “an awful lot of time” for another bidder to gatecrash the process. A row broke out between Premier and its shareholders last week after the board dug in to insist on a higher offer before opening the company’s books to McCormick.
“The board feels that the single thing shareholders look for is a competitive environment when it comes to a company in play,” he said. “It is a competitive environment.”
The Bisto and Bachelor’s maker last week rejected McCormick’s bid. The next day the private equity firm Warburg Pincus sold its 17pc stake to the Japanese noodle maker Nissin for 63p per share. It prompted claims from Premier shareholders that the board had acted in the interests of one major shareholder to the detriment of others.
But Mr Darby said: “The Premier board feel very confident that rejecting 60p was a good decision. Warburg Pincus took the opportunity of selling their shares and chose to sell their shares to Nissin. Just as much as it could have been a deal between Warburg Pincus and McCormick. I’m sure all three of them were involved.”
“It’s now a marketplace and McCormick have the opportunity to buy, some would say, 83pc of Premier shares and others would say 100pc.”
McCormick has indicated it is only interested in outright ownership of the company. It has said it could increase its bid, but only after it has inspected the books and Premier’s heavy pension liabilities.
Mr Darby rejected McCormick’s claim that the Premier board had failed to discuss the bid properly. The charge angered major shareholders last week, prompting public criticism of the Premier board.
Mr Darby said: “The chairmen have met once in the last five and a half weeks, had four very significant telephone conversations and multiple exchanges of emails and letters. There has been a lot of communications between the two chairmen.”
Premier will seek to persuade shareholders it has acted appropriately in meetings this week. Mr Darby is due to present the accelerated growth plan that he said helped convince the board that McCormick’s 60p per share offer significantly undervalued the business.
The three-pronged plan to deliver sales growth of up to 4pc over the next few years includes selling more Mr Kipling cakes to impulse buyers at tills, shifting brands from tinned aisles into supermarket fridges and an international expansion that Mr Darby said will be boosted by the relationship with Nissin.
Premier Foods and Nissin have formed a partnership to share noodle manufacturing technology and branding. Mr Darby said the arrangement had been in the works since 2013 and it showed there was no attempt to scupper McCormick’s bid.
Mr Darby said: “They’ve got to put on table an indicative offer that’s more in line with what the board sees as the value and they’ve also got to be more clear on what any conditions are. The ball has to be in McCormick’s court.”
The key to credibility as far as the Premier’s board is concerned could be McCormick’s attitude to the company’s £390m pension deficit. City sources believe the American company may be seeking a way to keep the liability off its balance sheet. Such a manoeuvre is viewed as potentially impossible under UK pension regulations and therefore a blow to the chances of a deal.
By Christopher Williams
Source: The Telegraph
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