Breadmakers Hovis and Kingsmill butter up £75m merger
Bread producers Hovis and Kingsmill are set for a historic merger with their owners expected to ink an agreement after months of discussion.
Kingsmill, whose immediate parent Allied Bakeries is owned by London-listed Associated British Foods (ABF), and Hovis could benefit from up to £50m of annual cost savings from a merger.
The proposed agreement, as reported by Sky News, would see ABF acquire Hovis for £75m.
This would snap up the bread producer from its private equity owners Endless and follow months of discussions between the latter and ABF.
A formal tie-up could be officially agreed as early as the end of next week, sources told Sky, but the complex nature of the deal resulted in emphasised caution on specific timings.
Should it go ahead as proposed, the merger would unite two of Britain’s most historic bread producers under one moniker. Allied Bakeries was founded in 1935 by William Garfield Weston, meanwhile Hovis’ origin goes back to the late 1800s after Herbert Grime pocketed a £25 prize for coming up with the brand name, which was derived from “Hominis Vis” – latin for “strength of man.”
Kingsmill and Hovis hoping to rise with merger
The UK bakery market is estimated to be worth about £5bn in annual sales, but has taken a bruising from inflation, specialist competitors and shifting consumer habits in the last decade.
The surge in popularity of low-carb diets have also damaged the bread industry’s financial health in recent years.
ABF, the FTSE 100 giant that also owns Primark, said during its interim results in May that Allied Bakeries had struggled in a “very challenging market.”
“We are evaluating strategic options for Allied Bakeries against this backdrop and we expect to provide an update in [the second half of] 2025.”
Wheat and flour prices soared on the back of the Russia and Ukraine war. Hovis cited these inflationary pressures in its most recent set of accounts filed at Companies House last year.
Hovis is understood to have 24 per cent, whilst Allied has 17 per cent. A merger between the pair would propel them to the largest market segment share, ahead of Warburton’s 34 per cent.
This could catch the eye of the Competition and Markets Authority, though comes as a time where economic watchdogs are facing government pressure to “regulate for growth”.
In January, the CMA’s chair, Marcus Bokkerink, was forced to step down from the role at the behest of business secretary Jonathan Reynolds as government ministers sought to emphasise their pro-growth message.
Lawyers described the move as the “most overtly political” regulatory intervention of recent years.