The US flavors giant today (April 13) announced that, following a due diligence review, it would not be making a formal offer for the manufacturer, which also owns major UK brands including Bisto and Sharwood’s.
McComick stated 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 had made three approaches to Premier in recent weeks, increasing its suggested price from an initial £0.52 ($0.74) a share to £0.65 ($0.94) a share on March 30.
Following the third approach, Premier agreed to meet with McCormick to "discuss value drivers, a review of material pensions documentation, current trading and material contracts, and so to establish whether McCormick will increase its offer price to a recommendable level".
'Strong future for an independent Premier Foods'
Although Premier last week said these talks had been “constructive”, the board today stated it saw “a strong future for an independent Premier Foods”.
However, shares in the business had crashed almost 30% this morning on the news that McCormick was walking away from the deal.
The Premier board added: “Premier Foods and its advisers have engaged extensively with McCormick to provide it with the information requested. The Board appreciates the open and constructive spirit in which the engagement with McCormick was conducted.”
Premier also said it planned to accelerate growth through new strategic initiatives to expand into new formats, channels and markets.
Plans for US growth
As reported last week by this site, these include targeting a gap in the US market between the existing $10.7bn (£7.6bn) fresh prepared cakes & pies category and the $4.4bn (£3.1bn) market for ambient cakes & pies with a long shelf life. This follows a trial with a major US retailer last year, when it rolled out Apple, Fruit and Mississippi Mud Pies to 250 stores.
The manufacturer also has ambitious plans to grow cake in the on-the-go market in the UK through smaller formats such as twin-packs of cake slices. From this week, Premier is launching a national roll-out of on-the-go products including slices twin-packs and two-packs of Cherry Bakewell tarts and Cadbury Mini-Rolls.
Other growth plans, including potentially extending into chilled categories through soups, pies and light meals; and expanding its noodles business through a partnership with Japanese manufacturer Nissin Foods.
Premier Foods has this week launched a £2.5m ($3.5m) TV campaign for Mr Kipling featuring the brand’s French Fancies cakes.
Running over a seven-week period in the UK, the ad is part of a £4m ($5.7m) marketing investment in Mr Kipling that includes outdoor and in-store activity in April and May. The business is also launching a sponsorship with TV channel ITV in June to promote new and existing UK products.
Using the tagline ‘Exceedingly Good Distraction’ – a variation on the brand’s traditional ‘Exceedingly Good cakes’ tag – the campaign is designed to be fun and humorous.
One ad depicts three generations of a family viewing a honeymoon slideshow from newlyweds, when a photograph they don’t want the family to see flashes up and causes an embarrassing situation. Mr Kipling French Fancies are on hand to divert the family’s attention.
“For decades, Mr Kipling has been part of the nation’s everyday memorable moments and this new TV creative focuses on driving and reinforcing that emotional connection,” said Mr Kipling marketing controller Kelly Davis.