UK's Premier Foods rejects McCormick's $700 million takeover approach

By Martinne Geller and Vidya L Nathan

(Reuters) - Britain's Premier Foods has rejected a second takeover approach from U.S. peer McCormick & Co, saying it undervalued the maker of Mr. Kipling cakes and Bisto gravy.

Premier said on Wednesday that McCormick first approached it on Feb. 12 with a possible offer of 52 pence per share, which it rejected. On March 14, McCormick put a possible 60 pence per share on the table, which Premier also dismissed as too low.

Shares in Premier were trading at 47 pence at 1035 GMT, up 49 percent from their close on Tuesday at 31.50 pence.

McCormick, known for its flagship spices and Lawry's seasonings, is valuing Premier at about 496 million pounds ($704 million) at 60 pence per share, based on Reuters data.

The U.S. company has until April 20 to make a firm offer for the company under British takeover rules.

"McCormick's proposal significantly undervalues the business," Premier's chairman, David Beever said in a statement.

"(It) fails to recognise the value of Premier's performance to date and prospects for the future, including the strategic plans we have to accelerate growth."

Premier raised its medium-term sales growth forecast to a range of 2 to 4 percent, up from 1 to 2 percent, helped by the roll-out of Mr. Kipling and Cadbury cakes more broadly, the extension of its grocery brands into more premium, chilled categories, and stepping up its international expansion.

At the same time, Premier said it signed a cooperation deal with Japan's Nissin Foods Holdings Co Ltd, maker of instant noodles, that could see Premier sell Nissin's products in Britain and Nissin sell Premier's overseas.

The deal could also see Nissin take a stake in Premier Foods and gain a board seat if its stake was 15 percent or more, according to a statement.

(Editing by Gopakumar Warrier and Alexander Smith)