Earlier this year, the CMA fast-tracked its phase one merger investigation to phase two at the request of both firms.
The competition regulator was due to make its final decision by 24 June, and the original phase one deadline had been set for 19 February, with the fast-tracking to phase two potentially bringing the process forward by as much as six weeks.
Today (16 June), the CMA has given its final approval to ABF’s bid to acquire its longtime bread-making rival Hovis.
The move will see ABF, which owns the Kingsmill brand, become the largest bread manufacturer in the UK, commanding an estimated 35% share of the overall market.
Valued at an estimated £75 million, the acquisition will unite 16 bakeries, merging the respective companies’ distribution networks.
The inquiry group found that if the merger did not go ahead, the most likely outcome would be that ABF would exit the market entirely in Great Britain and Northern Ireland, after making “significant losses” over the last 14 years.
Cyrus Mehta, chair of the independent inquiry group leading the investigation, said: “Bread is a basic staple for millions of people, which is why it is important we looked carefully at this deal and assessed the competition implications for households across the UK.”
“On the basis of the wide range of evidence we received, which showed the difficult position many UK-based bakeries are in, we found Allied Bakeries – owned by ABF – would likely leave the market entirely if the deal did not proceed. Taking that into account, we have concluded the deal does not raise competition concerns.”
Responding to the news, an ABF spokesperson said: “We welcome the unconditional clearance provided by the CMA and we will now work on next steps towards completion.
“Combining with Hovis enables Allied Bakeries to continue operating as well as drive significant synergies to create a sustainably profitable UK bakeries business over the long term that is better placed to compete and establish a platform for product innovation.
They continued: “As the CMA found, demand for packaged, sliced bread has reduced significantly due to changing consumer tastes and the bread market faces a difficult economic backdrop. However, we believe the market for nutritious, good value staples remains significant and this business can create value for shareholders, provide greater choice for consumers, increase efficiencies for customers and support the wider UK economy.”
