Kingsmill owner acquires Hovis in a bid to dominate UK bread market

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The owner of Kingsmill has agreed to acquire rival Hovis in a deal worth an estimated £75 million, a move that could create the UK’s biggest bread brand if it receives regulatory approval.

Associated British Foods (ABF), parent company of Kingsmill maker Allied Bakeries, confirmed it will buy Hovis Group from private equity firm Endless LLP. The deal will merge the UK’s second- and third-largest bread brands, putting them in direct competition with market leader Warburtons, which currently accounts for more than a quarter of packaged sliced bread sales.

The acquisition is subject to review by the Competition and Markets Authority (CMA), which will assess whether the combined business faces sufficient competition from supermarket own-label bread and other brands. The CMA could take up to a year to complete its investigation.

ABF said it had been exploring “a range of strategic options” for its bakery arm after years of declining demand for pre-sliced packaged loaves and a loss of scale in its nationwide distribution network.

“Profitability at Allied Bakeries has been increasingly challenged,” the company noted, citing changing consumer tastes and pressure on distribution.

Hovis, one of Britain’s most recognisable food brands, has also faced financial difficulties amid the long-term decline of the sliced loaf market. Endless acquired Hovis from Gores Group and Premier Foods plc in November 2020.

Strengthening their ability to compete

ABF said the deal would integrate production and distribution across both companies, delivering “significant cost synergies and efficiencies” and strengthening their ability to compete. The company also plans to invest in product innovation, improving existing ranges and expanding into new categories.

George Weston, Chief Executive of Associated British Foods, said:

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.”

Aidan Robson, Managing Partner of Endless LLP, said:

We are proud of the journey we’ve shared with Hovis to date, supporting this historic brand in a highly competitive and challenging market. The transaction with ABF represents an opportunity to create a platform for long-term sustainability in the bakery sector for the benefit of retailers and consumers.

While we work towards achieving CMA clearance of the transaction, our focus remains on Hovis to continue delivering exceptional products and service to its customers.”