Facts on the Hovis & Kingsmill Merger
- ABF poised to acquire Hovis in a £75m (€86.3m) transaction
- The deal may finalize as early as next week
- This merger could position the new entity as the UK bread market leader with a 41% market share
- Expected annual savings of up to £50m through consolidation
- This move responds to pressures on the bakery sector due to inflation and declining demand
- Part of a wider merger and acquisition trend within the food and drink industry
Associated British Foods (ABF), which controls Kingsmill through its parent company, Allied Bakeries, approaches closure on a deal to purchase the competitive brand Hovis.
This information comes from a Sky News report.
According to Sky News sources, the £75m (€86.3m) merger could be officially confirmed by the end of next week, although complexities in the transaction might affect this timeline.
Should the merger proceed, it will unite two of Europe’s oldest bread producers: Allied Bakeries, established in 1935 by Willard Garfield Weston, and Hovis, founded in 1886 by Richard “Stoney” Smith.
“The Hovis-Kingsmill merger is a clear sign of the pressures facing the UK bakery sector,” states James Watson, UK partner at Argon & Co, a global operations strategy and transformation consultancy. “With inflation driving up costs and bread consumption in steady decline, consolidation was always a question of when, not if.”
Furthermore, Watson notes that this deal would establish ABF as a new market leader, surpassing Warburtons’ 34% share. However, the reality is that both companies have been experiencing unsustainable losses.
“The real prize here is efficiency,” Watson comments. “Rationalizing overlapping bakery networks and reducing costs in procurement, logistics, and manufacturing is essential.”
In fact, estimates suggest that the merged entity could generate up to £50m in annual savings.
“This aligns with a broader trend in the food and drink sector, where mergers and acquisitions are utilized to combat cost pressures and seize growth opportunities in more resilient categories,” Watson adds.
However, he warns that execution will be critical. Disrupting existing customer relationships during this transitional phase, while both brands are losing market share, could exacerbate the situation.
The Hovis-Kingsmill merger joins a growing list of strategic partnerships, such as Mars-Kellanova and Greencore-Bakkavor. The industry is racing to adapt and survive.
Looking ahead, Watson emphasizes the importance of moving beyond mere management of decline. “The focus should shift to building momentum by addressing structural issues in the bread market and responding swiftly to changing consumer trends—whether concerning health, specialty products, or premium offerings.”
As ABF nears finalization of the Hovis agreement, this merger represents a crucial turning point for the bakery sector. Success will depend not only on cost-cutting measures but also on revitalizing consumer interest and adapting to a dynamic market.