By Martinne Geller and Freya Berry
LONDON (Reuters) - U.S. spice company McCormick (NYSE:MKC) said it could raise its takeover proposal for Britain's Premier Foods after Japanese instant noodle maker Nissin Foods bought a 17 percent stake in the target.
The response came after Premier, the maker of familiar British food brands Mr Kipling cakes and Bisto gravy, reiterated that McCormick's 60 pence per share approach, worth more than $700 million (£495 million), undervalued it.
Premier said that Nissin was paying 63 pence per share for a 17.27 percent stake, a total of 89.9 million pounds, in a move likely to complicate McCormick's efforts.
Nissin identified U.S. private equity firm Warburg Pincus, Premier's biggest shareholder, as the seller.
Following two rejections by Premier Foods, McCormick said it was willing to proceed with "limited confirmatory due diligence" that only comprises a review of pensions documentation, current trading and material contracts.
It said it would be willing to consider increasing its latest proposal -- which it said gives Premier an enterprise value of 1.5 billion pounds -- if justified following that review.
It said its offer was "highly deliverable due to its limited pre-conditions" and that it was disappointed that Premier's board was "conducting itself in a way that denies Premier Foods' shareholders the opportunity to consider" its offer.
A Premier spokesman had no immediate comment on McCormick's statement.
The value of Premier Foods has been depressed by a high debt load and pension obligations, but it offers a range of mainstream grocery brands that are slow-growing but profitable.
Premier shares, which soared 70 percent on Wednesday, were down 3 percent at 52 pence at 1605 GMT.
'ONE MEETING'
Following an initial approach in February and a second one in March, McCormick now has until April 20 to make a firm offer for Premier under British takeover rules.
McCormick, known for its spices and Lawry's seasonings, said that despite several efforts to "enter into a meaningful dialogue" with Premier, the company had been "unwilling to engage constructively," giving it only one face-to-face meeting with Premier's chairman, on Feb. 12.
Earlier on Thursday, Standard Life (LON:SL) Investments, Premier's third-largest shareholder, criticised the board of Premier over its handling of the situation.
"We note with some dismay the timing of Nissin's acquisition of a stake in Premier Foods," said David Cumming, head of equities at Standard Life Investments, the fund arm of insurer Standard Life.
"In our view, this does not reflect well on the Premier Foods Board's objectivity and commitment regarding its engagement with McCormick and consequently its desire to pursue maximum value for shareholders."
Standard Life has a roughly 7 percent stake in Premier.
Nissin and Premier are seeking to finalise the terms of a relationship agreement that is conditional on Premier no longer being in a so-called offer period. That agreement also allows for the companies to collaborate on sales and innovation.