LONDON (AP) - Premier Foods PLC said Monday it will buy RHM PLC for $2.4 billion in cash and shares to create Britain's largest food producer.
Under the terms of the deal, which has been recommended by RHM's board, Premier will pay one new share and $1.65 for every RHM share, Premier said in a statement. That values RHM's shares at $6.98 each, a premium of 29.7 percent over the stock's closing price on Friday.
RHM shareholders will hold 41 percent of the enlarged company, and Premier shareholders 59 percent.
''This acquisition brings Premier more great British brands with leading category positions which fit naturally in our portfolio,'' said Robert Schofield, the company's chief executive.
Premier Foods' brands include Branston pickle, Sunpat peanut butter and Quorn meat substitute. The two companies have combined annual sales of $5.15 billion, 93 percent of it in the United Kingdom.
Clive Black, an analyst at Shore Capital, believes Premier paid too much to buy into a lower-quality business.
''The management might be too keen to do a deal after failing to get United Biscuits,'' Black said.