ABF's £75m takeover of Hovis has secured regulatory clearance, creating the UK's largest bread brand with a combined market share of over 50%. The Competition and Markets Authority (CMA) approval comes after an investigation that found no competition concerns in the British bakery market, despite initial concerns raised last December.
The CMA's decision was based on evidence suggesting Allied Bakeries, ABF's existing UK bakery business, would likely exit the Great British and Northern Irish markets if the Hovis deal did not proceed. This strategic acquisition is a significant development for ABF, which owns Kingsmill and supplies various bakery products across the UK. Both Allied Bakeries and Hovis supply own-brand bakery items to major supermarket chains, with the broader UK bakery sector facing persistent challenges such as declining consumer demand and rising operational costs.
ABF's revenue declined by nine per cent to £9.5 billion in the six months ending February, while Hovis reported an eight per cent fall in revenue to £440 million in the year to September 2024. The deal is expected to drive significant synergies and create a sustainably profitable UK bakeries business for ABF.
This move comes as ABF prepares to spin off its Primark retail arm, with food businesses set to take centre stage in the conglomerate's strategy. For households and businesses, this consolidation could lead to supply chain efficiencies, but long-term implications for pricing and product variety will be closely watched. The FTSE 100 has seen ABF shares react to various announcements, and this latest development solidifies its position within the food sector.
The combined entity's market share will likely influence future pricing strategies and product availability in the bread market. Investors will be watching for the promised synergies and sustained profitability in the bakery division as integration progresses. With a total of 20 bakeries across the UK, ABF's acquisition of Hovis marks a significant milestone in the sector.