McCormick walks away from Premier Foods

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Rebuffed in its initial three efforts to buy Premier Foods, McCormick & Company has decided the British food maker is too pricy, abandoning its acquisition bid.

“McCormick has, after careful consideration, concluded that it would not be able to propose a price that would be recommended by the Board of Premier Foods while also delivering appropriate returns for McCormick shareholders,” the Sparks-based company said in a statement on Wednesday.

The company added that its due diligence of Premier Foods was done “in an open and collaborative spirit.”

Premier released a statement Wednesday acknowledging McCormick’s decision and said its board “sees a strong future for an independent Premier Foods.”

It wasn’t supposed to turn out this way, but McCormick’s courtship of Premier never went smoothly.

After McCormick’s annual shareholders meeting on March 30, CEO Lawrence Kurzius said it did not expect Premier to make McCormick’s interest in the company public.

“Frankly we thought it would be disadvantageous to them to go public because our offer was very strong. We thought their shareholders would react favorably to it. We think that was bad strategy on their part,” he said.

People familiar with the deal saw this as Premier’s desire to start a bidding war, even though McCormick’s first two offers of 52 pence and 60 pence per share gave the company a handsome premium. The company received an offer from Nissin Foods, with whom it has formed a strategic alliance, but turned it down.

McCormick’s third and final proposal was for 1.5 billion pounds ($2.2 billion), including debt, as of March 30. Premier said that that amount was too low but added that it would meet with McCormick to see if the company would raise its 65 pence per share bid.

And then came Wednesday’s announcement.

McCormick was interested in Premier as part of its strategy to acquire companies in countries where the spice maker already has a presence. McCormick has been in the U.K. through its Schwartz brand for 30 years. The company has made a number of other recent acquisitions, including  Drogheria & Alimentari, Brand Aromatics and World Foods.

Kurzius has made it clear that the company’s interest in international brands will continue.

McCormick’s decision to walk away may also have been influenced by the substantial U.K. pension risk that Premier carries — although the issue was hardly a secret. Alternatively, McCormick may also not have figured out a way either to buy out or work with Nissin Foods, which now has a 20 percent stake in Premier.

Before McCormick’s interest surfaced last month, Premier had a market value of 246 million pounds, near a five-year low. Investors didn’t view it as a takeover target. After all, the cost of the business zooms up to more than 1 billion pounds when Premier’s debt and colossal pension liabilities are added on. Only a large food group could afford it, yet Premier’s assortment of second-tier brands wouldn’t be attractive to such a buyer.

That logic has been vindicated.

Bloomberg contributed to this story.