While no financial specifics have emerged regarding the highly anticipated merger, a Sky News report from last month indicated that the deal is projected to be valued at approximately £70 million.
Hovis, currently under the ownership of private equity firm Endless LLP, has encountered significant losses in recent years. Additionally, Associated British Foods acknowledged that overall profitability for its UK bakery division, Allied Bakeries, has been adversely affected by a downturn in demand for pre-sliced, packaged bread.
The completion of this transaction is contingent upon regulatory approval. However, if approved, Associated British Foods anticipates that merging the production and distribution efforts of both firms will generate “significant cost synergies and efficiencies” and foster a “profitable UK bread business that is sustainable over the long term.”
Associated British Foods, which also operates Primark, sees the merger as an opportunity for Allied Bakeries to enhance its competitive edge within the UK bakery sector. This will be facilitated by an innovation program aimed at refining existing products and broadening its product lines.
George Weston, chief executive of Associated British Foods, remarked: “This transaction will create a UK bakeries business that is both profitable and sustainable over the long term. Supporting the Hovis and Kingsmill brands with well-invested and efficient operations will also enable innovation and growth. This solution will create value for shareholders, provide greater choice for consumers, and increase efficiencies for customers.”
Food Manufacture has reached out to Endless for additional comments. In response to the news, James Watson, UK partner at consultancy Argon & Co, noted that this merger is a “clear sign of the pressures facing the UK bakery sector.”
“The deal gives ABF a new market leader with a 41% share, surpassing Warburtons’ 34%,” Watson explained. “However, behind the headline lies a challenging reality: both firms have been incurring unsustainable losses.”
“The real prize here is efficiency—rationalizing overlapping bakery networks and cutting costs in procurement, logistics, and manufacturing.”
