Cakes and pickle: Mr Kipling firm agrees Branston takeover

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The Independent Online

Hovis-to-Mr Kipling firm RHM today backed a £1.2 billion takeover by Branston Pickle owner Premier Foods.

The proposed tie-up will create a business with annual sales of around £2.6 billion - almost all of which will be in the UK.

Premier Foods' other brands include Hartley's, Angel Delight and Quorn, while RHM is also known for Paxo, Bisto and Sharwoods.

Premier, which focuses on the grocery and food product segments, said the deal strengthened its relationship with the major UK food retailers.

It added that there would be £85 million of annual savings and benefits from integrating the two businesses, but did not detail the impact on jobs.

Premier said it would combine RHM's culinary brands and cake divisions into its grocery operation, while keeping RHM's breads business as a separate arm.

RHM employs more than 15,000 people at 50 locations in the UK and France, while the business generated sales in excess of £1.5 billion last year. St Albans-based Premier has around 3,000 staff and sales of £790 million in 2005.

Premier has been on the acquisition trail since it listed on the stock market two years ago and recently bought the UK arm of Oxo and Homepride firm Campbell Soup.

RHM has endured some challenging trading conditions since its flotation last year.

A year ago the company said its cakes operation, including Lyons and Mr Kipling, was in trouble and it recently warned that a huge increase in wheat prices would dent profits in the first half of the financial year.

The group supplies around one third of the UK's daily bread, delivering in excess of two million fresh loaves and rolls to more than 9,000 supermarkets and small independent stores nationwide every day. As well as Hovis, brands include Granary and Mother's Pride.

The two companies today said they started talking about a potential deal more than a year ago.

Premier chief executive Robert Schofield said his business had acquired some "tremendous British brands".

He added: "We've known (for some time) that this is a combination that had to happen. This is a natural combination that has compelling industrial logic."

Today's offer represents a premium of almost 30 per cent on the RHM share price prior to the deal being announced. RHM investors are being offered a mixture of cash and Premier shares in a deal which values each RHM share at 352.45p.

However, the company's share price leapt 36 per cent to 370p, suggesting there could yet be a rival offer. Premier shares were up 9 per cent to 293.25p.

Premier said it had no plans to sell any of the brands being bought today.

RHM's breads divisions sells products such as Hovis and Mother's Pride, while its culinary brands arm has well-known names such as Bisto, Paxo, Sharwoods, McDougalls and Robertson's. The cakes division is the largest in the UK, with brands such as Mr Kipling, Cadbury's and Lyons.

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Merger plan unites favourite food brands

By Tim Hobden, PA

A tie-up between Premier Foods and RHM brings together a host of kitchen cupboard favourites from pies and bread to pickles and marmalade.

Both companies have a wide spread across the supermarket shelves, with RHM supplying around one third of the UK's daily bread and Premier boasting famous brands such as Branston and Ambrosia.

:: Premier sells 4.5 million jars of Gale's honey and 28 million jars of Branston pickle each year. Enough Hartley's jam is also bought to spread over 300 million slices of toast, while its other key brands include Sun Pat peanut butter, as well as Ambrosia creamed rice, custard, semolina, sago and tapioca.

:: Premier also owns Crosse & Blackwell products including Sarson's vinegar and Waistline salad cream. Smash mashed potato, Bird's custard, as well as Chivers jams and the Cauldron vegetarian range. The company employs 3,000 people in the UK.

* Premier Foods has been on the acquisition trail since it listed on the stock market two years ago and bought the UK arm of Oxo and Homepride firm Campbell Soup for £450 million in July. However, it failed in its effort to buy McVitie's, Penguin and Jaffa Cake owner United Biscuits in a £1.7 billion deal over the summer.

* In August, Premier said it had lifted operating profits by 13 per cent to £41.7 million in the six months to July 1, thanks to a hunger for its non-meat Quorn products. It achieved 15 per cent year-on-year sales growth in Quorn after increasing advertising spend behind the meat-free brand, which it acquired for £172 million in June 2005.

* In October, the firm announced it had extended its licensing agreement with television presenter and chef Loyd Grossman to make pasta and curry sauce ranges under the Loyd Grossman brand until 2026.

* RHM delivers more than two million fresh loaves and rolls to over 9,000 supermarkets and small independent stores every day. Its bakeries also produce more than 850 other products, including crumpets, fruit buns, croissants, rolls, scones, muffins and scotch pancakes.

* RHM makes cakes under the Mr Kipling, Lyons and Gateaux brands, as well as cake bars for Cadbury's. Bisto gravy, Sharwood's Asian sauces, Robertson's jam, Golden Shred marmalade and Frank Cooper's preserves are also some of its brands.

* In October, Marlow-based RHM said price hikes in its bread division had helped to boost half-year sales by 2 per cent, although it said the culinary division has been affected by the hot summer. It said operating profits from continuing operations for the first half would be approximately £70 million. Last year, full-year profits came in at £70.3 million.

* The RHM group employs around 16,000 people at more than 50 locations across the UK and France.

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