Tomkins to 'demerge' its European milling and baking business

by Teresa Acklin
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   LONDON — Speculation in U.K. financial circles is continuing over the direction to be taken by Tomkins P.L.C. in the “demerger” of its European food businesses, which includes Rank Hovis, the largest flour miller in the United Kingdom, and British Bakeries, one of the U.K.'s largest bread bakers.

   Tomkins in June said it expected to either sell or spin off the business in the early part of the year 2000. Most observers believed that the demerger would involve a floatation of shares in the food business on the London stock market. But Sunday Business reported that Greg Hutchings, Tomkins' chairman, was beginning to favor a management buyout as bringing a higher price for the business.

   Analysts suggested that the demerged Tomkins food business would be valued at about £1.2 billion (U.S.$1.9 billion) in a spinoff, compared with £1.8 billion (U.S.2.8 billion) seen by Mr. Hutchings as a “reasonable” price. Sunday Business said Mr. Hutchings viewed a management buyout backed by private equity groups as bringing a £2-billion price for the food business.

   In releasing preliminary results on July 22 for the fiscal year ended May 1, Tomkins disclosed that it sustained a loss of £29.8 million (U.S.$46.5 million) on the April 30 sales of four Spillers flour mills to ADM Milling Co., Leawood, Kansas, U.S.

   Tomkins said it sold the four mills for £38.2 million (U.S.$59.6 million).