Tomkins is expected to expand its engineering and construction operations with acquisitions if the £1bn sale of its food division, Rank Hovis McDougall, to venture capital firm Doughty Hanson goes ahead.
Tomkins’ share price rose by 5p to 217p on news of the disposal, even though the sale price was lower than investors had hoped for. It followed Tomkins’ recent disposal of its US food manufacturer, Red Wing.
Opinions were divided over prospects for the slimmed-down group, which is left with its core US-based automotive engineering and construction businesses.
Chairman David Newlands pointed to sales and profits in the company’s core engineering businesses, which were well ahead of expectations for the first half of the financial year, largely because of buoyant US markets.
Nick Hyslop, engineering analyst at Dresdner Kleinwort Benson, said the company’s recent figures were strong, but future performance may not be so good. Tomkins’ markets look weaker now than they have done over the past three years and the US automotive and construction industries are expecting a downturn in activity.
Lower growth expectations in US markets are likely to encourage Tomkins to look for acquisitions elsewhere.
Greg Hutchings, the chief executive and former chairman, said he wanted the group to be more evenly balanced between North America and Europe.
With construction booming and the availability of low-cost labour in central Europe, the region is thought to be of prime interest to Tomkins.
The sale of Rank Hovis McDougall is conditional on approval from an extraordinary general meeting of Tomkins’ shareholders.
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