Tomkins loses buns-to-guns tag with sale of RHM to Doughty Hanson

Rank Hovis MacDougall is expected to become an independent, publicly quoted company within three to five years after finance group Doughty Hanson finally completed the £1.1bn acquisition of the food manufacturer yesterday from Tomkins, the automotive conglomerate.

Rank Hovis MacDougall is expected to become an independent, publicly quoted company within three to five years after finance group Doughty Hanson finally completed the £1.1bn acquisition of the food manufacturer yesterday from Tomkins, the automotive conglomerate.

The deal gives Doughty Hanson control of some of Britain's best-known food brands including Hovis and Mother's Pride bread, MacDougall flour, Bisto gravy, Saxa salt and Golden Shred marmalade. The finance group, which already owns household names like Umbro sportswear, said it had no plans to break up RHM or cut jobs among the 21,000 workforce. The firm said it planned to grow the business organically and by acquisitions in the European food market.

Under the terms of the deal Doughty Hanson will pay £666m cash and take on £473m debt. Tomkins will return £700m of the proceeds to shareholders via a share buy-back programme. The remainder will be used to reduce debt. City analysts said they were not expecting Doughty Hanson to make any disposals. David Lang, food manufacturing analyst at Investec Henderson Crosthwaite, said RHM had been a strong performer in branded goods but had suffered from tight margins and price deflation in the own-label supermarket brands sector.

Tomkins bought RHM in 1992 in a deal which, together with the acquisition of Smith & Wesson firearms, led to the "buns to guns" tag. Under the leadership of Greg Hutchings, chief executive, it put the business up for sale in May 1999. Last month RHM reported operating profits of £144m on sales of £1.7bn, for the year to April. Tomkins shares closed 5p higher at 217p.

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