Gavin Darby of Premier Foods
McCormick has walked away from any potential bids for Premier Foods.Premier Foods

Shares in Premier Foods plummeted 30% early on Wednesday (13 April), after US flavouring manufacturer McCormick withdrew its bid for the food producer.

The New York-listed group revealed it was not feasible to reach a compromise over a price that would deliver appropriate return to its shareholders, while at the same time being recommended by the board of Premier Foods.

McCormick said in a statement that its due diligence review "was conducted with the management of Premier Foods in an open and collaborative spirit".

The news comes only two weeks after the US company submitted a fresh bid of 65p a share, for the maker of Bisto gravy and Mr Kipling cakes after Premier Foods had refused two separate proposals, worth 52p and 60p a share respectively.

Premier Foods justified its decision to turn down the bids by saying that the offers undervalued the company and opted to seal a cooperation agreement with Japanese noodle maker Nissin.

The decision prompted criticism from a number of shareholders, including Paulson & Co and Standard Life Investment, after the Japanese group agreed to purchase a 17.3% stake in the company from private equity firm Warburg Pincus for 63p per share in a move that saw Nissin become Premier Food's largest shareholder.

The St Albans-based company has been undergoing a multi-year restructuring plan, which included a £1.1bn refinance package and the sale of a 51% stake in bread brand Hovis, had been encouraged by its shareholders to listen to offers from the US group.

After McCormick announced its decision to walk away from any potential bids, Premier Foods reiterated the negotiations had been held in an "open and constructive spirit" and that it was confident over its outlook.

"The board sees a strong future for an independent Premier Foods, and believes that the foundations have been laid for significant growth and shareholder value creation," it said in a statement.