The proposed acquisition of Hovis by Associated British Foods (ABF), the company behind the Kingsmill brand, has been given the green light by the Competition and Markets Authority (CMA), valued at £75 million. This significant merger will establish the UK's largest bread brand, combining iconic bakery products under one umbrella, including Hovis, Mother's Pride, Ormo, alongside ABF's own brands such as Kingsmill, Allinson’s, and Sunblest.
The CMA's decision followed an in-depth investigation into the proposed deal, which was first announced last August. The regulator concluded that the takeover would not pose significant competition concerns due to its analysis indicating that Allied Bakeries, ABF's bakery division, may withdraw from the UK market entirely if the acquisition did not proceed. This outcome could have particular implications for lower-income consumers who rely on bread as a staple food item.
Allied Bakeries has faced substantial challenges in recent years. The CMA highlighted that UK bread suppliers are grappling with declining consumer demand for traditional sliced bread and increasing operational costs, including energy, wheat, and distribution expenses. Allied Bakeries itself has recorded losses for the past 14 years, despite various restructuring efforts.
Cyrus Mehta, chair of the independent inquiry group leading the investigation, underlined the importance of their scrutiny due to bread being a basic staple for millions of households in the UK. The extensive evidence received highlighted the difficult position of many UK-based bakeries, which led them to conclude that Allied Bakeries would likely exit the market without the deal. This perspective was crucial in determining that the merger would not raise competition issues.
Hovis, acquired by Endless in 2020, also owns the Mother's Pride and Ormo brands. Like Allied Bakeries, Hovis has experienced financial pressures, with pre-tax losses increasing to £4.7 million in the year to September 2024. The combined entity aims to leverage efficiencies in production and distribution, potentially creating a more resilient business in a challenging market landscape where other strong competitors like Warburtons operate.