NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY (IN WHOLE OR IN PART), IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT DOES NOT CONSTITUTE A TAKEOVER OFFER OR AN OFFER OF SECURITIES.
23 March 2016
For immediate release
Premier Foods plc
Premier Foods plc rejects approach from McCormick & Company, Inc. and announces Cooperation Agreement with Nissin Foods Holdings Co., Ltd.
· McCormick approach significantly undervalues Premier's growth prospects and represents an insufficient premium to Premier's enterprise value
· Investment-led strategy starting to deliver results
· New strategic initiatives expected to accelerate growth trajectory
· Cooperation Agreement with Nissin to create long-term value through strategic partnership of brands, markets and technology
· Update on Hovis Holdings Ltd and Knighton Foods Ltd joint ventures
· Board's expectations of Trading Profit for full year remain unchanged
The Board of Premier Foods plc ("Premier" or the "Company") confirms that it received an unsolicited, non-binding and highly conditional approach from McCormick & Company, Inc. ("McCormick") on 12 February 2016 regarding a possible offer for the entire issued, and to be issued, ordinary share capital of the Company at an indicative price of 52 pence in cash per Premier share. This approach was rejected on the basis that it significantly undervalued the Company and its prospects. The Board received a subsequent approach on 14 March 2016 with a revised possible offer for the entire issued, and to be issued, ordinary share capital of the Company at an indicative price of 60 pence in cash (the "Indicative Price") per Premier share (the "Proposal"). This approach has also been rejected on the basis that it significantly undervalues the Company and its prospects, and therefore the Board does not consider that the Proposal would be in the best interests of Premier and its shareholders.
Commenting on the approach David Beever, Chairman of Premier, said:
"McCormick's Proposal represents an attempt to capture the upside value embedded in Premier's business that rightfully belongs to Premier's shareholders. The Proposal fails to recognise the value of Premier's performance to date and prospects for the future, including the strategic plans we have to accelerate growth.
McCormick's Proposal significantly undervalues the business and the Board has unanimously decided to reject it."
McCormick's Proposal represents an insufficient premium to Premier's enterprise value
Whilst the price per share indicated in McCormick's Proposal is significantly above the current share price, due to Premier's specific capital structure, the Board considers that shareholders should evaluate the premium implicit in McCormick's Proposal with reference to Premier's enterprise value (which includes allowances for financial debt and ongoing pension obligations). On this basis, the offer represents an insufficient premium which, in the Board's view, does not fairly reflect the benefit to McCormick of gaining control of Premier.
Furthermore, the Board does not believe that the multiple of enterprise value to EBITDA implied in McCormick's Proposal fairly reflects the Company's growth prospects. The Board considers that the Net Present Value of the future cash flows expected to arise from the Company's growth plans outlined below would imply a price per share significantly above the Indicative Price.
In accordance with Rule 2.6(a) of Takeover Code (the "Code"), McCormick is required, by not later than 5.00 p.m. on 20 April 2016, either to announce a firm intention to make an offer for the Company in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline can be extended with the consent of the Takeover Panel in accordance with Rule 2.6(c) of the Code.
There can be no certainty that any offer will be made nor the terms on which any such offer might be made. Premier shareholders are strongly advised to take no action in respect of the Proposal.
This announcement is being made by Premier without the prior agreement or approval of McCormick.
Investment-led strategy starting to deliver results
The Board sees a strong future for an independent Premier and believes that the foundations have been laid for significant growth and shareholder value creation.
Premier has a strong and valuable portfolio of market leading brands, extensive distribution across key retail channels, a well-invested manufacturing base and strong operational cash flows.
Under the strong leadership of CEO, Gavin Darby, Premier has assembled a highly experienced management team that has successfully restructured the business and put in place an investment-led growth strategy that is already starting to deliver results.
· Since 2014, the Company has more than doubled its rate of new product innovation, launching a wide range of new products, packaging formats and line extensions to meet changing consumer trends.
· Premier expects to increase significantly its investment in consumer marketing from approximately £25 million in the 2013/14 financial year to approximately £36 million in the 2015/16 financial year.
· The investments behind some of the biggest brands including Mr. Kipling, Cadbury cakes, Oxo and Bisto, delivered gains in volume, value, market share and household penetration in 20151.
· The Company is driving growth in channels beyond the supermarkets, including discounters, online and international.
The Board believes that, by extending this strategy to its other brands, the Company will deliver further growth in the future. The Board further considers that the step-up over the last two years of the Company's investment in brand marketing and product innovation, against the background of a challenging UK food retail environment, means that the Company is at an inflection point in terms of its longer-term growth prospects.
New strategic initiatives to accelerate growth
The Company has additionally identified a number of new strategic initiatives to help accelerate growth across its three Business Units of Grocery, Sweet Treats and International. Whilst these initiatives are expected to incur initial upfront investment of £2-4 million in the full year 2016/17, the Company is now raising its sales growth guidance for the medium term from 1-2% to 2-4%.
The new initiatives will leverage the Company's existing platforms, infrastructure and brand presence to expand further into new formats, channels and markets:
· In Sweet Treats, we plan to build on the successful trial of our Cake-To-Go range of Mr. Kipling twin pack slices and Cadbury mini roll twin pack by accelerating growth of our brands in broader convenience channels; to do so, we will capitalise on our manufacturing investments, innovation expertise and dedicated new team.
· In Grocery, we intend to extend our strong brands into premium areas within the chilled grocery sector in the sweet and savoury segments, including product ranges to meet consumers' growing health-consciousness.
· In International, we plan to leverage the investment we have already made in hiring an experienced team to step-change the size of our international business. Our focus will be on accelerating the expansion of our cake brands in the US and other geographies using our differentiated offering, unique formats and packaging. Initial store trials have demonstrated the potential for future growth in these markets.
Cooperation agreement with Nissin Foods Holdings Co., Ltd. ("Nissin")
Over recent years, Premier has discussed a number of potential strategic opportunities with Nissin. The Board has now agreed to enter into a cooperation agreement with Nissin (the "Cooperation Agreement"), conditional upon: (i) Premier no longer being subject to an offer period under the Code; and (ii) no third party having, by the date on which such offer period expires, announced that any offer for Premier has become or been declared unconditional as to acceptances or that a scheme of arrangement has become effective.
With annual revenues of around USD3.8 billion and operating profit of around USD216 million, Nissin, which invented the world's first instant noodles in 1958, operates in 19 different countries, spanning Asia Pacific, the Americas, Europe, Middle East and Africa. It is a global leader in instant noodles holding the number one or two positions in key markets, including Japan, the United States and Brazil and has a growing presence in chilled and frozen foods, cereal-based confectionery and yoghurt beverages in Japan. Nissin's presence in Europe includes Hungary, Germany and Spain, with brands such as Cup Noodles, Soba and Top Ramen. It also benefits from a state-of-the-art global research and innovation centre in Japan that develops more than a thousand new products that are distributed around the globe every year and has significant expertise in starch technologies, sodium reduction and production techniques.
The new strategic partnership has the potential for significant long-term value creation for both organisations through strategic cooperation in areas which may include:
· Providing Premier with access to Nissin's innovative products and formats to distribute in the UK market under either Nissin's or Premier's brands, such as Batchelors.
· Enabling Premier to benefit from Nissin's international scale to accelerate the distribution of Premier's products in key overseas markets.
· Sharing of Nissin's significant intellectual property, innovation and technical know-how to develop new products.
· Creating opportunities for both companies to leverage their joint manufacturing capabilities and infrastructure.
· Facilitating sharing of expertise and best practice through appropriate secondments of personnel.
Premier is also considering, in the context of the proposed commercial collaboration envisaged by the Cooperation Agreement, entering into a conditional Relationship Agreement with Nissin on customary terms and consistent with market practice (including a right to appoint a non-executive director to the Board of Premier for so long as the relevant party holds an interest in shares representing 15 per cent. or more of the ordinary issued share capital of Premier) if Nissin were to acquire a substantial shareholding in Premier. In any event, under the terms of the Cooperation Agreement, Nissin has unconditionally confirmed that it does not intend to make any offer (as defined by the Code) for Premier for a period of at least six months from the date hereof in accordance with, and subject to, the provisions of Rule 2.8 of the Code (although, subject to those provisions, Nissin may otherwise be able to acquire shares in Premier). As a result of such confirmation and this statement, Nissin will be bound by the restrictions contained in Rule 2.8 of the Code. In summary, these restrictions prohibit Nissin from making an offer for Premier (or from acquiring further shares that would give rise to an obligation to make an offer for Premier) within the six-month period following the date of this announcement, other than in the circumstances described in Note 2 to Rule 2.8 of the Code (that is, with the agreement of Premier's board, if a third party announces a firm intention to make an offer for Premier, if Premier announces a "whitewash" proposal or reverse takeover, or if the Takeover Panel determines that there has been a material change of circumstances).
Gavin Darby, Chief Executive Officer of Premier said:
"This is an exceptional opportunity for us to gain a major strategic partner which understands our business and supports our growth ambitions. We look forward to working with Nissin to explore ways our two businesses can cooperate to better serve both our customers and our shareholders."
Update on Results for 2015/16
The Company expects to report its Preliminary Results for the 52 weeks ending 2 April 2016 on 17 May 2016. The Board's unpublished expectations for Trading Profit for this 52-week period remain unchanged.
As part of its year-end procedures, the Company has been reviewing the carrying value and status of its two associate companies, Hovis Holdings Ltd and Knighton Foods Ltd ("Knighton"). The Company currently estimates that its share of loss in associates for the full year 2015/16 will be approximately £18m. This charge reflects certain one-off costs as well as ongoing trading. The share of loss in associates was previously disclosed as £7m for the 26 weeks to 3 October 2015. In addition to the above, the Company expects to write-off fully its remaining investment in Hovis of approximately £8m. These items do not reflect a cash outflow for Premier.
The Knighton joint venture was established in 2014 to combine certain Premier dry powder manufacturing facilities with those of a third party, Specialty Powders Holding Ltd ("Specialty Powders"). This agreement enabled certain manufacturing assets to transfer from the Knighton site to Premier's site at Ashford, Kent, which delivered significant efficiencies as expected. The joint venture brought additional third-party volume to the Knighton site, which also remains a critical supplier to Premier (which takes about 40% of Knighton's output).
Premier has now concluded that maintaining its interest in Knighton in the form of a joint venture is no longer in the Company's best interests. It is therefore in negotiation with Specialty Powders to acquire the 51% of Knighton that it does not currently own (for de minimis consideration). Such an acquisition would increase Premier's reported sales for 2016/17 by approximately £35m, which is approximately £19m greater than the business originally contributed by Premier to the joint venture on its creation in June 2014. The Knighton business is substantially non-branded and, on full consolidation, is expected to have a broadly neutral impact on EBITDA.
Premier expects to gain control (as defined under IFRS-10) of Knighton before the end of the current financial year. On acquiring such control, Premier would be obliged to consolidate Knighton's net debt of approximately £11m which is currently financed by a third-party asset backed lending programme. Premier would seek to refinance this facility if the acquisition were to proceed. Premier would also revalue its investment in Knighton, which is likely to result in additional one-off charges in 2015/16 of up to £10m.
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For further information please contact:
Premier Foods plc +44 1727 815 850
Richard Johnson (Corporate Affairs Director)
Richard Godden (Head of Investor Relations)
Maitland +44 207 379 5151
Neil Bennett
Kate O'Neill
Tom Eckersley
Ondra Partners (Joint Lead Financial Adviser to Premier) +44 207 082 8750
Robert Hingley
Jason Meers
Michael Tory
HSBC Bank plc (Joint Lead Financial Adviser to Premier) +44 20 7991 8888
Charles Packshaw
Keith Welch
Alex Thomas
Jefferies International Limited +44 20 7029 8000
(Joint Co-Financial Adviser and Corporate Broker to Premier)
Paul Nicholls
David Watkins
Credit Suisse International +44 20 7888 8888
(Joint Co-Financial Adviser and Corporate Broker to Premier)
Stuart Field
Ben Deary
Notes to editors
1. Source: Kantar Worldpanel, 52 w/e 3 January 2016
Disclosure requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of the offeree or of any securities exchange Bidder (being any Bidder other than an Bidder in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange Bidder is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree and (ii) any securities exchange Bidder(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange Bidder is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange Bidder prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange Bidder must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange Bidder. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange Bidder, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of the offeree company or a securities exchange Bidder, they will be deemed to be a single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by any Bidder and Dealing Disclosures must also be made by the offeree company, by any Bidder and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).
Details of the offeree and Bidder companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any Bidder was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.
HSBC Bank plc, which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting as financial adviser exclusively for Premier and for no-one else in connection to the matters in this announcement and will not be responsible to anyone other than Premier for providing the protections afforded to its clients nor for providing advice in connection with the Offer or any matter referred to herein.
Ondra Partners, which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting as financial adviser exclusively for Premier and for no-one else in connection to the matters in this announcement and will not be responsible to anyone other than Premier for providing the protections afforded to its clients nor for providing advice in connection with the Offer or any matter referred to herein.
Jefferies International Limited ("Jefferies"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Premier as financial adviser and corporate broker and no-one else in connection with the Proposal and Jefferies will not regard any other person as its client(s) of Jefferies in connection to the matters in this announcement and will not be responsible to anyone other than Premier Foods for providing the protections afforded to its clients or for providing advice in connection to the matters in this announcement, the contents of this announcement or any transaction, arrangement or other matter referred to in this announcement.
Credit Suisse International (Credit Suisse), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively for Premier Foods and no one else in connection with the matters in this announcement and will not be responsible to anyone other than Premier Foods for providing the protections afforded to clients of Credit Suisse nor for providing advice in relation to the Offer , the content of this announcement or any other matter referred to herein. Neither Credit Suisse nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Credit Suisse in connection with this announcement, any statement contained herein or otherwise.
Rule 2.10 of the Code
In accordance with Rule 2.10 of the Code, Premier confirms that, as at close of business on 22 March 2016, it had in issue 826,567,063 ordinary shares of 10 pence each. Premier does not hold any shares in treasury. The International Securities Identification Number for Premier ordinary shares is GB00B7N0K053.
Publication on websites
A copy of this announcement will be made available, subject to certain restrictions relating to persons resided in restricted jurisdictions on Premier's website at www.premierfoods.co.uk by no later than 12 noon (GMT) on 23 March 2016.
The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.
