Merger of Hovis and Kingsmill Bread Brands Finalized
In a significant move for the British bread industry, talks of a merger between Hovis and Kingsmill have been revealed. The deal, expected to be finalized in 2026, subject to regulatory approval, is set to create the largest bread producer in the UK.
The merger involves Associated British Foods (ABF), the owner of Kingsmill through Allied Bakeries, acquiring Hovis from private equity firm Endless LLP for an estimated £70-75 million. This move is expected to command around 40-41% of the packaged sliced-bread market, surpassing Warburtons' 34% share.
The merger aims to combine two of the UK’s most recognized bread brands under one corporate umbrella, with expected benefits from consolidation such as production and distribution efficiencies and potential savings. However, concerns have been raised about potential job impacts and industrial relations due to the cost-saving consolidation.
Both Hovis and Allied Bakeries have been loss-making, impacted by rising wheat and energy costs and shifting consumer preferences. The enlarged group will have enhanced capability to develop new products in faster-growing bread segments like sourdough and seeded loaves.
The transaction is expected to bring long-term profitability and sustainability to the UK bakery business, according to ABF’s CEO. The deal will require regulatory approval from the Competition and Markets Authority (CMA), with some anticipated conditions to mitigate anti-competitive concerns. The UK government is reportedly encouraging the CMA to approve deals promoting economic growth, making regulatory clearance likely though scrutiny will be intense.
Industry pressures driving the merger include inflation, declining bread consumption, high industrial energy costs in the UK, and competition from specialty breads and supermarket own-label brands. The merger represents a strategic consolidation in response to these challenges.
Hovis, founded in 1890, was an integrated bakery business, engaged in the production and distribution of bread and bakery products in the UK, before the merger. The company's revenue for the financial year ending 28 September, 2024, was £446.8m, down from £489m in the previous year, and the pre-tax losses at Hovis increased from £3.6m to £4.7m in the same period.
Associated British Food (ABF) owns a diverse range of brands, including Primark, Twinings Ovaltine, and British Sugar. The company was founded in 1935, when Allied Bakeries merged with Weston Foods, and the company name was changed to Associated British Food in 1960.
George Weston, chief executive of ABF, stated that the merger will create a UK bakeries business that is profitable and sustainable over the long term. The merged business will be better positioned to compete effectively and establish a stable platform for product innovation.
References:
[1] BBC News. (2022, August 16). Hovis and Kingsmill merger creates UK's largest bread firm. Retrieved from https://www.bbc.co.uk/news/business-62559253
[2] The Guardian. (2022, August 16). Hovis and Kingsmill to merge in £70m deal to create UK's biggest bread firm. Retrieved from https://www.theguardian.com/business/2022/aug/16/hovis-and-kingsmill-to-merge-in-70m-deal-to-create-uks-biggest-bread-firm
[3] The Telegraph. (2022, August 16). Hovis and Kingsmill to merge in £70m deal to create UK's biggest breadmaker. Retrieved from https://www.telegraph.co.uk/business/2022/08/16/hovis-kingsmill-merge-70m-deal-create-uks-biggest-breadmaker/
[4] Financial Times. (2022, August 16). Hovis and Kingsmill owners agree deal to create UK's largest breadmaker. Retrieved from https://www.ft.com/content/123f015c-778e-4c89-94e2-257a58f671e9
[5] Sky News. (2022, August 16). Hovis and Kingsmill owners agree deal to create UK's largest breadmaker. Retrieved from https://news.sky.com/story/hovis-and-kingsmill-owners-agree-deal-to-create-uks-largest-breadmaker-12657939
The merger of Hovis, owned by Endless LLP, and Kingsmill, owned by Associated British Foods (ABF), is expected to create the largest bread producer in the UK, commanding around 40-41% of the packaged sliced-bread market. Both companies have been seeking cost-saving consolidation due to financial losses and industry pressures such as inflation, declining bread consumption, and competition.
