FTSE food firms take flight

A £1.2bn (€1.8bn) takeover of RHM by Premier Foods caused shares in the food sector to surge today.

The resumption of merger-and-acquisition activity also helped the wider market, which clung to positive territory with a gain of 6.8 points to 6028.3 by mid-morning.

The move for FTSE 250 Index listed RHM caused shares in the Mr Kipling firm to jump by 31%, up 83.75p to 355.5p, above the offer price of 352.45p a share.

Premier Foods also benefited with a gain of 9.75p to 279p as investors welcomed the prospect of merger-related cost savings and greater bargaining power with major food retailers.

Consolidation in the sector also lifted Northern Foods, which stood 4.25p higher at 112.25p, while top-flight Cadbury Schweppes was 10.5p higher at 528p.

Other Footsie risers included National Grid after regulator Ofgem said it would allow £5bn (€7.4bn) to be spent on transmission networks between 2007 and 2012. The move was seen as positive for National Grid and caused its shares to rise 1%, or 7p, to 708.5p.

The pressure caused by the weak US dollar was shown on the fallers board, with US-based cruise-ship company Carnival down 38p at 2391p and GlaxoSmithKline off 17p at 1343p.

BAE Systems, which has also been hit by concerns over its Eurofighter contract with Saudi Arabia, fell 9.75p to 381p.

Elsewhere, further speculation about a takeover of EMI lifted shares in the music publishing and recording company. Shares were up 3.25p at 293.25p, even though a report said it would reject an offer from private-equity firm Permira.

Reports that Thomas Cook may enter the race for First Choice’s package-holiday arm caused shares in MyTravel, which has already stated its interest in the business, to fall by 4.5p to 222p. First Choice rose 4.75p to 269p.