-- This article was written by Jonathan Braude of The Deal
Spices and flavors maker McCormick & Co (MKC) isn't letting a little bitterness on the tongue spoil its appetite for Britain's Premier Foods.
The Sparks, Md. producer of spices, herbs and sauces on Wednesday, Mar. 30, raised its indicative offer for Premier Foods to 65 pence a share on Thursday, valuing the company's stock at £537 million ($773 million) and setting an enterprise value of about £1.5 billion.
However, stung by the target's previous hostility, McCormick once again made its revised approach conditional on "prompt and full engagement" from Premier Foods.
Premier Foods did not initially post a response to McCormick's proposal, but its share price rose in mid-morning trading to 59.75 pence, up 5.75 pence on Tuesday's close.
McCormick's previous offers of 52 pence a share and 60 pence a share were snubbed by Premier Foods and the target's board turned to Japan's Nissin Foods as a potential white knight.
Nissin not only agreed to a co-operation agreement with Premier Foods, but promptly acquired a 17.27% stake in the maker of Bisto gravy and OXO stock cubes from private equity shop Warburg Pincus for 63 pence a share.
Adding to the mix late on Tuesday, an analyst at Moody's Investors Service said the cooperation with the Japanese dried noodle company would be credit positive. Although Moody's stressed that Eric Kang's assessment was not a rating action, the analyst said in a note that "if implemented," the cooperation agreement would allow Premier Foods to distribute Nissin's products in the U.K. as well as support exports and new product development.
McCormick has from the beginning also made any formal offer dependent on Premier Foods allowing a review of its pensions documentation, current trading and its "material" contracts. But after the target's board rejected the first approach, the revised proposal of 60 pence was also predicated on prompt and full engagement from the board.
The latest proposal, which McCormick argued should be well received by Premier Foods' shareholders, employees, pensioners, creditors and other stakeholders, represents a premium of 106% to the company's undisturbed price of 31.5 pence on March 22 before the approach from the American company was announced. It also implies a multiple of 10.6 times Premier Foods' £144.9 million pro-forma Ebitda for the year to April 2015.
Premier Foods, of St. Albans, England, had net debt of £585.3 million as of Oct. 3, though it predicted in November that the total would fall significantly in the second half of its fiscal year.
Under the U.K. takeover code, McCormick now has until April 20 to make a formal offer or walk away.
-- This article was originally published by The Deal, a sister publication of TheStreet that offers sophisticated insight and analysis on all types of deals, from inception to integration. Click here for a free trial.