Premier Foods’ tie-up with Nissin not a frustrating action to McCormick bid, sector lawyers say
* Takeover Panel unlikely to find fault with Nissin stake build
* Conditional commercial arrangement should not raise hackles
* Nissin stake could prevent an eventual squeeze-out
Nissin Food Holdings’ [TYO:2897] purchase of a 17.3% stake in Premier Foods [LON:PFD], amid McCormick & Company’s [NYSE:MKC] repeated approaches to Premier, does not appear to violate the UK takeover code, sector lawyers said.
The Takeover Panel would be unlikely to scrutinise a sale of existing shares, and the conditionality of the proposed commercial partnership between Nissin and Premier means it would not get in the way of a joint Premier-McCormick operation, said the first sector lawyer.
But a source close to the situation said it is “extraordinary that the [Takeover] Panel has not said anything”. Premier’s involvement with Nissin is “calculated to frustrate” McCormick, according to the source, who noted media reports of annoyance among Premier shareholders that McCormick’s previous offers had not been entertained.
McCormick privately approached Premier with a 52p/share all-cash offer on 12 February, but was rebuffed by Premier’s board. McCormick returned on 14 March with a 60p/share offer, and was spurned again, as reported.
Nissin then signed a conditional commercial agreement with Premier on 23 March and purchased a 17.3% stake in the company from private equity house Warburg Pincus on 24 March. Media reports indicated that Nissin had been notified of McCormick’s interest while Premier shareholders were left in the dark. Nissin purchased its stake for 63p/share.
McCormick returned on 30 March with a 65p/share offer, conditional on due diligence on the target’s pension liabilities, as reported.
Premier announced its tie-up with Nissin as a counter-measure to the McCormick bid, a Nissin spokesperson told this news service.
But the first and a second sector lawyer said the tie-up is not a frustrating action because Nissin purchased an existing stake from a third party. This should pass muster with the Takeover Panel, they said.
However, Nissin’s 17.3% stake could make a McCormick scheme of arrangement - which would require 75% shareholder approval - more difficult, depending on how Nissin eventually votes, the first lawyer noted.
Nissin’s interest could also prevent an eventual squeeze-out by McCormick, both lawyers added.
The commercial partnership between Premier and Nissin hinges on Premier no longer being in an offer period, the first lawyer said. Nissin’s involvement could have been seen as a frustrating action if it had been unconditional, but in its current form the conditional nature should raise no hackles with the Takeover Panel, he said.
As Nissin’s stake was purchased above the 60p/share bid on offer at the time from McCormick, and despite Nissin’s advance knowledge of McCormick’s approach, it is unlikely that there was any price effect in violation of the Code of Market Conduct, the first lawyer added.
Premier’s coldness to McCormick’s approach may be due to its board wanting to preserve company independence at any cost, a second source close to the situation suggested.
Premier stated that the latest offer continued to undervalue the company’s upside, but said it was open to talks, as reported.
The company is likely hoping both for more cash and for “clarity around conditionality”, the second source said.
A person briefed on the McCormick side defended the offer’s conditionality, saying it was only natural that the bidder should fully understand the pension liabilities in store.
Premier Foods and McCormick did not respond to requests for comment.