Premier’s £1.2bn takeover of RHM came as a surprise to many investors, but the company has demonstrated an appetite for iconic British brands in the past.

Since its stock market flotation two years ago, Premier has acquired Bird’s custard and Angel Delight brands, and the company behind the meat substitute brand Quorn for £172m. In July it also acquired Campbell’s Soup, which includes Oxo, Batchelor soups and Homepride sauces, in a £460m deal.

After the RHM deal, Premier’s finance director Paul Thomas said the company was still looking for more UK brands to add to its portfolio and had the financial capacity to pursue further acquisitions.

The RHM deal is predicted by industry commentators to put pressure on rivals such as Associated British Foods and Northern Foods.

For the year ending 31 December 2005, Premier Foods reported sales of £790m and operating profits of £102m. The company wants to get a larger part of sales from branded products, which offer a higher rate of return, than making goods under supermarkets own-brands.

The deal with RHM will leave Premier as the UK’s biggest food producer with combined sales of around £2.6bn per year.

RHM has annual sales of over £1.5bn and over 15,000 employees at approximately 50 locations.

For the year ended 29 April 2006, RHM reported sales of £1.56bn and profit of £174m. RHM reported gross assets of £1.35bn and net debt of £676m.

Investment group Doughty Hanson floated RHM in July 2005 and retained a 33% shareholding in the company. It first sold stock to investors in July 2005 at 275p. RHM was valued at 352.45p per share by Premier in the deal. Despite high wheat and energy costs, RHM announced. In October that its first-half sales rose 2%.

Premier has predicted annual synergies of £85m over the next three years. According to press reports, these will come from £50m worth of cost reductions at manufacturing facilities, a further £25m will come from lower purchasing costs and £10m from closing RHM’s head office in Buckinghamshire, which employs 100 people.

Premier Foods was represented by Rothschild and Merrill Lynch in the deal. RHM was represented by Credit Suisse and Citigroup.