Premier Foods has laid out ambitious growth plans as it seeks to convince investors to hold out for a better offer from US predator McCormick.
The company behind Oxo cubes and Mr Kipling cakes said it had held constructive talks with McCormick, which owns Schwartz dried spices.
Premier Foods shares closed up about 5% at 58.5p after the stock market announcement, but are still valued at nearly half of their 2014 peak, depressed by a large debt load and pension liabilities left over from an acquisition spree.
It agreed to listen to McCormick’s offer last week, but only after rejecting a 65p-a-share bid that valued the company at £1.5bn including debt.
Discussions have included McCormick’s plans for Premier Foods’ sizeable pension scheme, which requires annual payments of more than £50m, according to projections.
The talks indicate that a deal could be closer than before, but Premier Foods issued a detailed presentation on Wednesday designed to strengthen its hand with key investors such as Standard Life and the hedge fund manager Paulson & Co.
The 44-page document outlines the company’s belief that it can increase sales by more than 4% a year thanks to a tie-up with the Japanese instant noodle company Nissin.
Nissin has built a stake of more than 19% in Premier Foods during the takeover saga with McCormick.
Premier said investors should consider the potential benefits of the new relationship when assessing the price at which they would be ready to sell.
It said it could plug into Nissin’s strength in key markets such as the US, China and Brazil via cooperation on branding and distribution. It also hopes to draw on Nissin’s portfolio of patents to increase sales of its existing products by improving them.
The presentation cites Nissin’s low-fat powdered soup “with mouth-feel of conventional soup”, which it said could improve its Batchelors Cup a Soup.
It also highlighted the potential benefits to Batchelors Super Noodles from Nissin’s patent for laser perforation technology, which makes thicker noodles hydrate faster.
The benefits of a partnership with Nissin add to Premier’s existing growth plans, which include expansion into the chilled food market and “cake on the go”.
It illustrated the potential for its cake to capture more of the “on the go” food market, pointing to a Costcutter store in Manchester where its Angel Slice has outsold Snickers and KitKats over a month.
The presentation also outlines the company’s plans for expansion in Australia, the US and the Middle East.
It expects to spend up to £4m on its growth plans during the 2016-17 financial year.
The company said it had already outlined growth plans, excluding its Nissin tie-up, to McCormick’s senior staff after being persuaded to listen to its offer by investors.
Paulson & Co and Standard Life, which together hold about 17% of the company’s shares, were instrumental in convincing Premier Foods to listen to McCormick’s offer.
The detail Premier Foods provided on the potential of its tie-up with Nissin appears designed to convince them to hold out for an increased bid.
The company also said McCormick would “benefit from significant synergies not reflected in their approach”, but did not expand on the statement in its presentation.
The company also reiterated that McCormick’s latest 65p-a-share bid “continues to undervalue the Premier Foods business and its prospects”.
