Investors gorge on RHM shares

By GARY PARKINSON
Updated:

 

HUNGRY buyers gorged on RHM shares this morning as the food maker returned to the London Stock Market for the first time in 13 years.

They were chased 25p higher to 300p in early trading, valuing the owner of Hovis bread, Mr Kipling cakes and Bisto gravy at over £1bn. More than 40m shares changed hands as all the big City investors denied the stock they wanted in the run up to flotation dived into the market.

RHM's owner, the private equity firm Doughty Hanson, reckons the shares on offer at 275p before today could have been sold six times over. Private investors must wait until Friday before they can buy.

The float is the second-biggest in London for two years, after online poker giant PartyGaming’s £5bn debut last month. RHM – formerly Rank Hovis McDougall – raised £475m and Doughty, management and employees sold shares worth £136m.

Paul Wilkinson, the former boss of RHM, reportedly scooped £4.8m by selling over £1.8m shares some 18 months after quitting the firm.

RHM, established in 1875 as flour miller Joseph Rank, will use the cash raise to cut debt to £711.

An overjoyed Ian McMahon, the chief executive, said: 'We have a clear strategy to continue RHM’s transformation into the leading UK-focused food company and we are determined to create value for our shareholders by executing this strategy successfully.'

RHM is already among the country's biggest food groups, supplying own brand nosh to Asda, Tesco and Waitrose supermarkets among others. It makes ready-meals, desserts, cakes, jams and marmalades for Marks & Spencer.

Sales topped £1.5bn in the year to the end of April, and it employs more than 16,000 workers. The group's roll-call of household name brands also includes Sharwood's Asian sauces, Lyons cakes, Robertson’s jam, Golden Shred marmalade, Bovril drinks and Paxo stuffing. Doughty gobbled up RHM five years ago for £1.18bn from conglomerate Tomkins. It retains a chunky stake. An earlier attempted to float was shelved in 2002 because of tough market conditions.

Today's price was towards the upper end of a suggested range, but was still well down on the £1.3bn value put on the business by Doughty earlier this year.

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