 The merger involves many of the UK's best-known food products |
Premier Foods, the owner of brands such as Branston sauces and Ambrosia Creamed Rice, has agreed to buy rival RHM for �1.2bn to become the top UK food firm. The board of RHM, which controls brands such as Hovis bread, Mr Kipling cakes and Bisto gravy, has approved the deal.
The merged company will have annual sales of �2.6bn, with 93% of those revenues coming from the UK.
Premier will pay a mixture of cash and new shares in a deal that values RHM stock 30% higher than its Friday close.
Shares soar
News of the deal sent shares in both companies up sharply.
RHM shares soared 33% in morning trading while Premier's shares rose 6%.
Premier said it would pay one new share and 83.2 pence in cash for each RHM share, working out at about 352.45p for each RHM share.
The purchase still needs to be approved by shareholders of both companies.
"This acquisition provides a unique opportunity to combine two of the UK's leading food companies," Premier chairman David Kappler said.
 | WHAT THE NEW FIRM WILL OWN Hovis, Mother's Pride, Mr Kipling, Lyons, Ambrosia, Bird's, Robertson's Jam, Golden Shred, Bisto, Oxo, Smash, Crosse & Blackwell, Branston, Homepride |
Earlier this year, Premier said that it was looking at acquisition targets and was reported to have formed part of a group that tried, and failed, to buy United Biscuits.
Some analysts questioned the price that Premier was paying for RHM.
"The management might be too keen to do a deal after failing to get United Biscuits," said Clive Black, an analyst at Shore Capital.
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The management might be too keen to do a deal after failing to get United Biscuits
