The ownership of UK food producer RHM, formerly known as Ranks Hovis McDougall, is once again in question, according to a recent interview with the Financial Times. The company that spent much of the 1980s desperately trying to remain independent, may soon change hands for the third time in a decade, claims the report.
The company which currently has a comprehensive brand portfolio ranging from Hovis bread, through to Mr Kipling, Cadbury's and Lyons cakes, Robertson's jams and Sharwoods sauces could be seen as an attractive acquisition option.
Doughty Hanson, the private equity group that bought RHM in 2000, has hired Credit Suisse First Boston to examine "strategic options". It paid £1.139bn (€1.147bn) for the business less than two years ago. That suggests it would want about £1.5bn now, argues the paper.
The former public business was acquired by Tomkins in 1992 for £935m.One executive who was at RHM during the Tomkins years told the paper: "The Tomkins takeover was good for RHM. The break with the past allowed change to take place. The production-led culture was replaced by a customer-focused one.
"Tomkins imposed financial disciplines. They shook millions of pounds out of the balance sheet, cut costs and improved productivity. RHM abandoned its global ambitions and cleared out the dross, such as the mushroom growing business, while developing new activities. And Tomkins backed Paul Wilkinson to make all the changes necessary at British Bakeries."
Under Tomkins the bakeries were rationalised and investment was put in to make them low-cost producers. Premium brands have been developed. The Hovis brand has been rejuvenated with the launch last year of Hovis Crusty. Sharp sales volume increases mean RHM now claims market leadership in the premium bread sector.
However, it has been unable to pick up businesses at reasonable prices, suggests the report. For instance, in the recent auction of Nestlé's ambient grocery brands, RHM is believed to have made an offer of £80m-£90m, far short of the £135m bid by Hicks, Muse, Tate & Furst.
If the company returned to the stock market, it would need to demonstrate "good visibility of growth and a decent dividend" to attract investors, according to David Lang, analyst at Investec. IT would also need to revise its financial structure and assure investors that the disciplines instilled in the past ten years would not be thrown away with a reversion to "the short-termism RHM displayed in the previous ten" claimed the report.