Tomkins trumps Hanson's RHM bid

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The Independent Online
GREG HUTCHINGS of Tomkins yesterday trumped his old boss Lord Hanson with a pounds 926m bid for Ranks Hovis McDougall, the food group, comfortably beating the pounds 781m offered by Hanson earlier this month.

Tomkins, whose products range from Smith & Wesson guns to lawnmowers, has been in discussions with RHM since September and has won a recommendation from the RHM board. Stanley Metcalfe, RHM's chairman, said: 'The track record which Tomkins has established of retaining and actively developing businesses has been an important factor for us in considering the long-term interests of our shareholders, employees and customers.'

Hanson said it was considering its position and urged shareholders to take no action.

'I am very surprised that the board of RHM has not been prepared to have discussions with Hanson with a view to establishing, in the interests of RHM shareholders, whether we might be prepared to offer a greater value,' Lord Hanson said.

He added that it was 'astonishing' that the group announced 'costly' plans to split the business into three two weeks ago despite being engaged in 'constructive dialogue' about a Tomkins takeover. RHM said the demerger proposal was designed to demonstrate to shareholders the value inherent in RHM.

Tomkins is offering 2.29 of its own shares plus 520p in cash for every four RHM shares. At yesterday's closing price of 212p, down 49p, that values RHM at pounds 893m. There is a full cash alternative of 260p a share, a total value of pounds 926m. But unlike Hanson's 220p cash offer, shareholders will be allowed to keep RHM's final dividend, which it forecast yesterday would be 9.54p. RHM's shares closed up 21.5p at 273p. Hanson shares were down 5 1/2 p at 226 1/2 p.

Barclays de Zoete Wedd, which is acting for Tomkins, is believed to have acquired about 10 million shares in the market yesterday, giving it a stake of between 1 and 2 per cent. It had previously owned 14,000 shares.

The Tomkins deal will be financed partly through an underwritten one-for-two rights issue at 200p a share to raise pounds 653m. That will be payable in two instalments, with the second tranche of pounds 269m conditional on the bid succeeding. It is forecasting a dividend of not less than 6.35p a share for the year to 1 May, a 12 per cent increase.

RHM, whose products include Mothers Pride bread, Mr Kipling cakes and Sharwood's chutneys and sauces, marks a departure for Tomkins, which has so far focused on engineering-related businesses such as the manufacture of valves, buckles and bicycles. But Mr Hutchings said: 'Tomkins' track record has been built on buying and developing quality manufacturing and distribution businesses and RHM fits all our acquisition criteria.'

Geoffrey Eaton, Tomkins' business development manager, added: 'RHM is fundamentally a manufacturing business. We buy the raw materials, process them, add value where we can, package them and distribute them.' He added that RHM's board had 'made lots of errors' and lower ranks of management were demoralised.

If the bid succeeded, Mr Metcalfe would resign as chairman but would stay on for up to three months as a consultant. The position of other directors would be reviewed although none were likely to get a seat on the main Tomkins board.

Mr Hutchings would not rule out making disposals if the bid succeeded, although he said: 'Our reputation is as a builder of businesses.' He also refused to comment on job losses.

RHM is forecasting pre-tax profits of not less than pounds 92m for the year to 5 September, down from pounds 150.2m last time. The fall is largely due to the continued bread war in Britain's supermarkets, which has sent prices and profits in the baking and milling division plummeting.

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