Kingsmill and Hovis agree £70m merger in competition test for Reeves

Yahoo

21 hours ago

Kingsmill and Hovis have agreed to a £70m merger to create Britain's biggest bakery, testing the competition watchdog's resolve after pressure from Rachel Reeves to approve more deals.
Associated British Foods (ABF), which owns Kingsmill through its Allied Bakeries division, on Friday said it planned to purchase rival baker Hovis from its private equity owner, Endless.
The deal will create the UK's biggest bread company, overtaking the current market leader, Warburton's. It comes as both Hovis and Kingsmill have struggled with profitability amid falling demand for sliced loaves in recent years.
ABF's tie-up must be approved by the Competition and Markets Authority (CMA), which is under pressure from the Government to wave through more mergers.
Clive Black, of Shore Capital, said: 'If [Ms Reeves] is interested in protecting jobs, then absolutely this is going to be a very good test case, because I severely question the viability of these two businesses in the long run if they don't merge.
'I think it could be quite dangerous, from a practical perspective in terms of jobs and supply chains, if the CMA took a very simplistic view of things, because both businesses are loss-making.'
In an unprecedented intervention this year, Marcus Bokkerink, the CMA chairman, was ousted by ministers following warnings from the Chancellor that it needed to rip up red tape to boost growth.
He was replaced on an interim basis by Doug Gurr, the former Amazon UK boss, with the intervention widely interpreted as signalling that Britain would be open to approving more takeovers.
ABF owns Kingsmill through Allied Bakeries, which was founded in 1935. Hovis has been owned by the private equity firm Endless since 2020. It was formerly owned by Premier Foods, the owner of Mr Kipling.
Demand for sliced loaves and traditional bakery products has fallen amid rising worries over excess carbohydrate consumption and concerns around so-called ultra-processed foods (UPF).
Soaring costs in the wake of the pandemic have heaped further pressure on bakeries. The price of wheat, which surged due to the Ukraine war, has proved particularly burdensome.
Kingsmill and Hovis have faced steep competition from Warburtons in recent years, which has pivoted away from traditional loaves towards other baked goods like crumpets, bagels and flatbreads.
George Weston, the chief executive of ABF, said: 'This transaction will create a UK bakeries business that is both profitable and sustainable over the long term.'
The CMA declined to comment.
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