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.