United State of America spice company McCormick & Co on Wednesday , raised its takeover proposal for British company, Premier Foods Plc, for the second time, calling on Premier Foods board to engage in talks that could lead to a deal.
The new proposal of 65 pence per share aims to break a stalemate that arose last week after Premier refused McCormick’s prior offers of 52 and 60 pence per share and instead agreed to an international cooperation deal with Japanese noodle maker Nissin (2897.T), sparking criticism from some Premier investors.
At 65 pence, McCormick is valuing Premier’s equity at 537 million pounds. Including debt and future pension liabilities, McCormick says it represents an enterprise value of 1.51 billion pounds.
The latest proposal is a little over double the stock’s closing price on March 23, when the approach was made public.
Analysts at Shore Capital urged Premier’s shareholders to accept the revised proposal.
“We see 65p as a good compromise price, allowing Premier’s management to highlight the extra value it has extracted from McCormick, whilst also offering shareholders the opportunity of a cash exit today at a reasonably full EBITDA (core earnings) valuation,” they said in a research note.
They also downgraded their rating on Premier stock to “Hold” from “Buy” due to its jump in light of the proposal.
A spokeswoman for Premier said the company had no immediate comment on the proposal. The maker of Mr. Kipling cakes and Bisto gravy said last week it would “give careful consideration” to an improved offer that better reflected the board’s assessment of the company’s underlying value over the long term.
It said the previous approaches “significantly undervalued” it.