Nissin, a Japanese instant noodle firm, has committed to buy a 17.27% stake in Premier Foods.
The move comes as the two companies finalise a relationship agreement which will give Premier the ability to distribute Nissin products in the UK, while making its own products more widely available in key overseas markets.
Premier Foods said there would also be opportunities for the sharing of intellectual property and manufacturing capabilities.
David Beever, chairman of Premier Foods, said: “We welcome Nissin as a new long-term shareholder in our business. By gaining a strategic investor who understands and supports our growth ambitions, we have an exceptional opportunity to deliver shareholder value. Based on the conditional cooperation agreement we announced yesterday, we very much look forward to working with Nissin to develop ways our two businesses can co-operate to drive growth.”
The move comes in the wake of Premier Foods announcing it had rejected two bids from US spice brand McCormick, the latter offer on the 14 March, valuing the company at 60p a share.
Dr Hossam Zeitoun, assistant professor of strategy and international business at Warwick Business School, said the move would help Premier Foods fend off a hostile takeover from McCormick and give the company time to turn around its troubled finances.
He said: “Premier Foods’ deal with Nissin will help it pursue its turnaround strategy and avoid a hostile takeover by McCormick. This co-operation will be another obstacle for McCormick and would make it even more difficult for the US company to complete a takeover.
“Companies under the threat of a hostile takeover often look for a ‘white knight’, ie. a friendlier acquirer, but in the case of Nissin it doesn’t want to be an acquirer - at least not yet. It is content with a stake in the company. This means Premier Foods can continue its turnaround strategy by decreasing its debt and working to boost its market share.
“Japanese companies are renowned for pursuing long-term objectives. In Japan, hostile takeovers are extremely rare, and Premier Foods is calling Nissin a long-term shareholder, which can give it time to follow its strategy through rather than looking for a short-term hike in its stock price. If all goes well, Nissin may want to acquire Premier Foods in the future, but not at the moment - it only wants a non-executive director on the board.”