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Premier Foods, the British maker of Bisto gravy and Mr. Kipling cakes, rejected two approaches from American spice producer McCormick & Co. that valued the company at as much as $702 million, and instead joined forces with Japan's Nissin Foods Holdings Co.
Premier spurned potential cash offers of 74 cents a share in February and 85 cents a share last week, the company said in a statement Wednesday. McCormick has until April 20 to indicate that it's making a formal offer or walk away.
Though the deal with Top Ramen maker Nissin wasn't described as a merger, the accord will allow the two companies to share brands and know-how. Premier's shares rose 71 percent in London.
"Premier has been showing signs of recovery, and CEO Gavin Darby has taken major steps forward, but there have been shoots of recovery before, so at 85 cents a share, this is a bloody good outcome," Robert Lawson, an industry consultant at Food Strategy Associates in London, said by phone. "Perhaps they think there is more to come from McCormick or from somebody else."
Premier Foods also raised its sales growth forecast over the medium term to as much as 4 percent, up from 1 percent to 2 percent previously. The St. Albans, England-based company plans to outline its growth strategy at an investor conference in London Wednesday.
The development shows not only how deal-making in the food industry is heating up in the wake of last year's merger of Kraft and Heinz, but also how Asian food companies have developed an appetite for European brands.
Britain's Quorn Foods was acquired by Monde Nissin Corp. of the Philippines in October, while China's Bright Food Group Co. snatched Weetabix cereal, a staple of U.K. breakfast tables.
McCormick, founded in a Baltimore cellar in 1889, did a trio of small acquisitions last year, but a deal for Premier would be its biggest since paying $604 million for spice-maker Lawry's in 2008. Its shares have risen about 30 percent in the past 12 months as a premium gourmet line and increased marketing have fueled sales gains.
McCormick said its most recent offer for Premier "reflects a substantial premium to all relevant Premier Foods share price metrics" and would provide investors in that company with the "certainty of cash value now."
"McCormick believes than an all-cash offer at this level should be well received by Premier Foods' shareholders, employees, pensioners and other stakeholders," McCormick said in a statement on Wednesday.