Shares in Premier Foods have soared this morning after the maker of Mr Kipling cakes and Bisto Gravy confirmed that it had received and rejected a £495m bid approach from US food giant McCormick.
Premier Foods said that it had received an initial offer of 52p-a-share from its US rival on February 12, after the shares had fallen by 27pc in just three months, but this was rejected “on the basis that it significantly undervalued the company and its prospects”.
The British food company revealed that McCormick made another tilt for the business with a sweetened 60p-a-share cash offer but this was again rejected on the basis that it still “significantly undervalued” the company.
“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 60p-a-share approach was a 78pc premium to Premier Food’s closing price the day before the bid approach was confirmed.
Premier Foods has been undergoing a multi-year restructuring under the leadership of chief executive Gavin Darby, following a boom-time spending spree that saw it buy up a raft of brands, but left it saddled with debt after the financial crisis hit.
As part of the restructuring process, Premier Foods handed control of its Hovis bread business to the US-based Gores group and pushed through a £1.1bn refinancing package, which included a £353m rights issue.
Since then, the company has been focusing on its ‘power brands’ and investing in product innovation, including a new line of Mr Kipling oaty cakes and Oxo flavour pots, to boost sales.
Defending its independence and strategy, Premier Foods said it was raising its sales guidance for the year.
The company, which also makes Batchelors Super Noodles, also said that it has signed a co-operation agreement with Japan’s Nissin, which invented the world’s first instant noodles in 1958.
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