No financial details of the long rumoured deal have been released, but a Sky News report from last month said it looked set to be worth around £70 million.
Hovis is owned by private equity firm Endless LLP and has seen losses mount in recent years, while Associated British Foods admitted that profitability at its UK bakery business Allied Bakeries has been challenged by a decline in demand for pre-sliced, packaged bread.
Completion of the transaction is subject to regulatory approval, but should it proceed Associated British Foods believes that the combination of the production and distribution activities of the two businesses will help drive “significant costs synergies and efficiencies” and create a “profitable UK bread business that is sustainable over the long term”.
Associated British Foods, which also owns Primark, expects the merger to allow Allied Bakeries to better compete within the UK bakery category with the support of an innovation programme focused on improving existing products and expanding into new product ranges.
George Weston, chief executive of Associated British Foods, commented: “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.”
Meanwhile, Endless managing partner Aidan Robson said the firm was “proud of the journey it has shared with Hovis” since 2020.
“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,” continued Robson.
“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.”
Workers must not bear the brunt
Commenting on how the merger might impact workers, general secretary of the Bakers, Food and Allied Workers Union (BFAWU) Sarah Woolley said that workers must not “bear the brunt of this merger”.
“We expect both companies to be open, proactive, and committed to protecting jobs, pay, and conditions — and we will hold them to that," Woolley added.
BFAWU national president Ian Hodson continued: “Our members are the beating heart of these businesses. Any future plans must start from a commitment to job security and better working conditions — not cost-cutting at the expense of the workforce.”
Unite the Union general secretary Sharon Graham also called for jobs to be protected.
“Unite represents workers at both companies and we will not tolerate attacks on jobs, pay or conditions,” Graham said.
“Unite will be working to ensure that Kingsmill and Hovis fully involve the union in any decisions that impact our members.”
Elsewhere, James Watson, UK partner at consultancy firm Argon & Co, explained that the merger was a “clear sign of the pressures facing the UK bakery sector”.
“The deal gives ABF a new market leader with 41% share, overtaking Warburtons’ 34%,” Watson said.
“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.”
