The Competition and Markets Authority (CMA) has begun its probe into the proposed acquisition of Hovis by Associated British Foods (ABF).
Phase 1 of the merger inquiry was launched this morning (18 September) with an invitation for interested parties to submit any initial views on the impact that the transaction could have on competition in the UK bread market.
Written comments will be accepted via email until 2 October and form the first part of the CMA’s information-gathering process prior to the initiation of its formal investigation into the deal announced on 15 August.
While financial details of the acquisition have yet to be revealed, the parties have claimed the move will drive ‘significant cost synergies and efficiencies’ to create a profitable business that is sustainable over the long term.
Both firms have reported losses in their most recent results.
A second half trading update for ABF had its manufacturing business Allied Bakeries – which produces bread brands Kingsmill, Allinson’s, and Sunblest – encountering “lower sales and an operating loss in a challenging market, as expected”. Hovis, meanwhile, posted an operating loss of £6.9m for the 52 weeks ended 28 September 2024.
British Baker has reached out to ABF and Hovis owner Endless LLP for comments.
ABF had previously announced it was anticipating that the CMA approval would take some time. “Until regulatory clearance is granted, Hovis Group Ltd and Allied Bakeries (part of ABF) will continue to operate as separate entities,” it said.
Earlier this week, Hovis CEO Jon Jenkins revealed he was stepping down from his leadership position, effective mid-September, with a replacement yet to be named. Jenkins has also served as boss of Allied Bakeries from 2015 to 2020.
Race to survive
James Watson, UK partner at operations strategy and transformation consultancy Argon & Co, commented that the Hovis-Kingsmill merger was a clear sign of the pressures facing the UK bakery sector. “With inflation driving up costs and bread consumption in steady decline, consolidation was always a question of when, not if,” he said.
“The deal gives ABF a new market leader with 41% share, overtaking Warburtons’ 34%. But behind the headline is a tough reality: both businesses have been making unsustainable losses. The real prize here is efficiency – rationalising overlapping bakery networks and cutting costs in procurement, logistics, and manufacturing.”
Execution will be everything, according to Watson. “Disrupting existing customer relationships now, while both brands are losing share, would risk compounding the problem,” he asserted.
“Longer term, the challenge is to stop managing decline and start building momentum. That means addressing structural issues in the bread market and responding faster to shifting consumer trends – whether that’s health, speciality products, or premium lines.”
Watson also noted the deal was part of a wider pattern across food and drink, where M&A is being used to counter cost pressures and capture growth in more resilient categories. “The Hovis-Kingsmill tie-up now joins a growing list of strategic pairings, including Mars-Kellanova and Greencore-Bakkavor. The race is on to adapt – and survive,” he added.
Food-to-go manufacturing giants Greencore and Bakkavor are in far better shape going into their proposed transaction, which is currently under investigation by the CMA with a phase 1 decision to come on 27 October. Bakkavor showed a 1.2% rise in like-for-like sales up to £1,079m in its latest half-year report, while Greencore upgraded its full year profit guidance after marking a 9.9% year-on-year increase in Q3 revenue.
The takeover move is expected to be completed in early 2026.
No comments yet