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McCormick will not acquire British food company

After raising its offer for British food company Premier Foods and being turned down twice, McCormick & Co. has dropped plans to pursue what would have been its largest acquisition ever.

The Sparks-based spice maker said Wednesday that Premier was seeking too high a price, pushing down shares of both companies. McCormick shares slipped 2.2 percent to close at $96.72 each, while Premier's shares plummeted nearly 25 percent to 43 pence (61 cents) per share.

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"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," McCormick said in its announcement. "Accordingly, McCormick has withdrawn its proposal to acquire Premier Foods."

McCormick said it made the decision after completing a review of Premier, which makes cake mixes, gravy and rice pudding and seasonings primarily for the United Kingdom market, conducted with Premier management "in an open and collaborative spirit."

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Premier, which initially resisted cooperation with McCormick, responded by saying it sees a strong future for an independent Premier Foods.

"Premier Foods and its advisers have engaged extensively with McCormick to provide it with the information requested," the company said in a statement. "The board appreciates the open and constructive spirit in which the engagement with McCormick was conducted."

McCormick's withdrawal came after the company had raised its bid March 30 to $2.2 billion, including debt, with a cash offer of 65 pence (94 cents) a share or $774 million. Premier had rebuffed two previous offers of 52 pence per share and 60 pence per share, but under pressure from shareholders indicated it would discuss the latest bid.

During its annual meeting March 30, McCormick's new president and CEO Lawrence E. Kurzius told shareholders he believed the increased offer it had announced that morning would be "well-received."

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But he also stressed that the spice and flavorings company would continue looking for both large and small acquisitions that would help expand products and increase scale in existing markets.

Karyl Leggio, a finance professor at Loyola University Maryland, said she was impressed that McCormick's leadership had the discipline to walk away from a deal that would have meant overpaying.

Often, in acquisition bidding, "there is a desire not to lose," she said. "They would up the bid to win. You win, but you've overpaid and the value to shareholders is reduced. They didn't do that. ... It speaks well to the leadership of McCormick and the commitment to shareholder value."

A Premier acquisition would have fit Kurzius' strategy of moving away from going into new markets in favor of extending the brand in existing markets, and finding companies that fit well with others in those market, she said.

But there's still a chance the deal could move forward, she said.

"It wouldn't surprise me if Premier comes back with a lower price," she said. "McCormick has drawn their line. This is what they're are willing to pay. It's up to Premier to accept a lower price or move on."

After rejecting McCormick's second bid last month, Premier had announced that Japanese instant noodle maker Nissin Foods Holdings Co. Ltd. agreed to purchase a roughly 17 percent stake in Premier from an existing shareholder. Premier plans to cooperate formally with Nissin to share products, distribution and know-how.

In its statement Wednesday, Premier said that agreement will "expand Premier foods' range of growth opportunities."

McCormick, with about 10,000 full-time employees worldwide, has been expanding internationally through recent acquisitions, buying complementary food manufacturers in Italy, Poland and China. A new manufacturing plant is underway in Dubai. In 2015, 43 percent of McCormick's sales were in foreign countries.

McCormick officials had expressed interest in Premier because it's products would complement the McCormick's offerings and bring "iconic" brands to the portfolio.

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