HANSON effectively threw in the towel yesterday in its battle for
Ranks Hovis McDougall (RHM) with Lord Hanson deferring to his former
protege Greg Hutchings of Tomkins. After the stock market closed, Hanson
announced it would not increase its hostile #790m all-cash offer
following the agreed bid for RHM made by Tomkins just over a week ago.
Lord Hanson said ''we have now seen the information given by RHM to
Tomkins. It adds little to our original assessment of RHM and we will
not increase our offer.'' Under Takeover Panel rules RHM was obliged to
pass on information given to Tomkins which Hanson specifically asked
for. Commenting on Hanson's decision, a spokesman for RHM said: ''We
welcome the clarification of the situation.''
The news from Hanson was not unexpected given his reluctance in the
past to pay over the odds for acquisitions. Although he was thought
likely to perhaps offer a little more money it would not have matched
Tomkins' #935m agreed bid.
Hanson had wanted RHM both for strategic and financial reasons, hoping
to build a core business centred on UK food. The RHM board recommended
the Tomkins offer, believing that it provided ''an attractive
alternative'' to the proposed demerger of the company aimed at boosting
shareholder value.
Although Tomkins, which makes Smith & Wesson guns and Murray bicycles
among other things, has no experience in the food industry, its chief
executive Greg Hutchings believes that Tomkins' brand management skills
will help revitalise RHM brands such as Mother's Pride bread and Bisto
gravy.
The City has yet to be entirely convinced that Greg Hutchings has not
made a major mistake in going for RHM. Tomkins believes that RHM matches
all its acquisition criteria, having looked at the company for several
months. Since launching the bid, Mr Hutchings has gone out of his way to
reassure financial institutions that the deal will not dilute earnings
even without the sale of some of RHM's grocery brands.
The fact that Hanson believes the company is worth 220p at best begs
the question of whether Tomkins has paid too much for a company which
still operates in a difficult trading environment. Tomkins intends to
give top priority to achieving a profit recovery in RHM's baking
business and so believes that RHM's acquisition of Dalgety's
bread-baking interests is an important step in this process.
The RHM board estimates that profit before tax for the year to
September 5 was not less than #92m compared with #150.2m in 1991. RHM is
paying a second interim dividend of 9.54p on January 4 next year, which
together with the interim dividend of 3.82p makes a total for the year
of 13.36p, the same as last year.
Tomkins' share rating having been at a premium of 10% or more to the
market is now expected to enter a period of being in line or possibly
even below the market average. The City will now cast about for the next
possible Hanson target with United Biscuits and Allied-Lyons high on the
list of speculative targets.
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