Hanson attacks RHM on brands

THE WAR of words between Hanson and Ranks Hovis McDougall will be stepped up this week when the conglomerate publishes its offer document for the bread, cakes and groceries group.

Hanson is expected to attack what it sees as the poor recent track record of RHM management, led by chairman Stanley Metcalfe. In particular, Hanson will concentrate on the performance of RHM's brands. Mother's Pride bread, Mr Kipling cakes and Bisto gravy will all be highlighted as having declined in the last few years.

'The big retailers are all moving towards offering one premium brand and own label,' said a senior Hanson executive. 'If they have other brands at all, they must be second, third or fourth. RHM needs to be in the right place to secure that market.'

He said that Mr Kipling was losing market share and Bisto 'has had a march stolen on it by Oxo'.

Hanson is also expected to pour scorn on RHM's plan, announced on Friday, to break itself up into three parts. While RHM is keen to emphasise that the three bits - flour milling and baking, groceries and cakes - all have a future on their own, a company adviser acknowledged they have created 'three bite-size chunks' that can be easily taken over.

The irony of RHM's action has not been lost on Hanson, regarded as the break-up specialist. Derek Bonham, Hanson's chief executive, stressed it has no immediate plans to sell off parts of RHM, although he added: 'I can't say that we wouldn't, because we would want to review the position of all RHM's brands. But our intention is to keep the company together.'

He said that under RHM's proposed demerger, the same management that had 'failed to deliver over the years' would be 'running three businesses rather than one, with everything that entails: three head offices, three sets of corporate registers, three company secretaries.'

Mr Bonham ruled out an immediate increase in the offer price - something many City observers believe would be enough to guarantee Hanson victory. 'There is no point in talking about price until we make sure the City understands what is happening at RHM at the moment. People need to be educated about the business.'

He said that he regarded the demerger plans as a sign of desperation. 'My guess is that they have traded about, looking for a white knight. There was nobody there, so this is the only option they have left.' An RHM spokesman claimed the break-up had been under consideration 'for three or four months' and that Hanson 'merely acted as the catalyst'.

Whatever the outcome, Mr Metcalfe's days in executive charge appear numbered.