RHM back on the bourse, gets a market cap of 1 billion pounds

LONDON: RHM Group, maker of Hovis bread and Mr Kipling cakes, got its re-listed on the London Stock Exchange Tuesday after a 13-year gap. At initial trading, the shares recorded a 6 percent jump above the listed price of 275 pence.

The company said the offer of 49.6 million existing shares and 172.7 million new shares was six times oversubscribed and analysts said the initial price spurt took the company’s market value to over one billion pounds. The offer represented 63.8 percent of the company’s issued capital.

The company, originally Rank Hovis McDougall, said the shares have been placed with a broad base of institutional shareholders. Chief executive Ian McMahon said, “We are delighted that RHM’s IPO has attracted such strong support among leading U.K. and international institutional investors.”

Besides Hovis and Mr Kipling, RHM has other brands like Bisto gravy, Paxo stuffing and Sharwood’s Asian sauces.

The sole bookrunner and global coordinator for the IPO, Credit Suisse First Boston, can exercise an option to place a further 22.2 million shares within 30 days. The balance shares will be held by the company’s current owner, private equity group Doughty Hanson, and its management.

Doughty Hanson had bought the company in 2000 from Tomkins PLC for 1.1 billion pounds, including debt.

RHM intends to make use of the funds generated to contribute to the company’s pension scheme (125 million pounds), repay securitised debts and purchase loan notes issued to the owners (472 million pounds).

McMahon said the company has a clear strategy to continue its transformation into the leading U.K.-focused food company, and “we are determined to create value for our shareholders by executing this strategy successfully”.

For the year ended April 30, the company had reported net income of 175.8 million pounds on sales of 1.53 billion pounds. This is compared with a loss of 56.3 million pounds in the prior period. It has 16,000 people on its rolls in the U.K. In addition to the branded items, the company also produces material for leading grocers like Tesco, WalMart’s Asda and J Sainsbury, which are then sold under the respective supermarket’s own brand names.