Premier Foods to face investor fury after failed US deal
Premier Foods is likely to be heavily scrutinised by investors this week for its failed US deal as it announces its full-year results.
The share price closed at 39.25p on Friday but had peaked at 60.25p at the end of March as a result of repeated takeover approaches from US flavouring giant, McCormick.
Although steadfastly defended by Premier’s board, the decision to turn down an offer that peaked at 65p attracted disdain from large shareholders such as US hedge fund, Paulson & Co and UK life insurer, Standard Life.
According to analysts at investment bank Jefferies: “McCormick provided a wake-up call to the effect that, at 32p, Premier might have been an undervalued asset. In spurning them, Premier’s board have signalled that they think that stand-alone value is in excess of 65p. If that now isn’t delivered, there will be consequences.”
Revenues are expected by Jefferies to be £762m on earnings of £148m, projected to be up £4m on the previous 12 months. The focus will also be on how the company plans to reduce borrowing with over £500m of net debt that attract hefty interest charges which weigh on cash flow.
McCormick made three approaches, which nearly doubled the share price, but Premier instead elected for a strategic partnership with Japanese noodle maker, Nissin Foods. Premier has stressed the benefits of this in expanding its global footprint and distributing Nissin’s products in the UK, while belittling McCormick’s offer as undervaluing the group.
According to company presentations “our exciting collaboration with Nissin Foods provides further growth and upside” to the highest offer from McCormick.