CMA begins full review of Kingsmill owner’s planned takeover of bread rival Hovis | Associated British Foods
The UK competition watchdog has stepped up its investigation into a £75 million takeover deal that would see Kingsmill’s owner buy sliced bread rival Hovis.
Associated British Foods (ABF), which also owns the Primark clothing chain, has confirmed plans to buy Hovis from private equity owners Endless in August, combining the UK’s second and third largest bread brands.
The Competition and Markets Authority (CMA) has launched an in-depth investigation into whether the deal will harm consumers and potentially lead to reduced choice on grocery shelves and higher prices. This followed a request by the two companies to expedite the merger review.
In a statement, the ABF said: “Our priority is to achieve regulatory approval as efficiently as possible and we are pleased to agree with the CMA that we will move quickly to the in-depth and detailed final stage of the merger reviews. We will continue to work constructively with the CMA to demonstrate the benefits of the transaction.”
The news comes after ABF issued a profit warning, saying it expected adjusted operating profit for the wider group to be below last year. This caused the group’s shares to fall as much as 11% on Thursday morning.
The CMA, which initially raised concerns in December, said on Thursday it had launched a “phase 2” investigation to assess whether the takeover would lead to a “significant reduction of competition” for mass-produced baked goods.
The regulator will ultimately have to decide whether the brands will face sufficient competition on price and quality between supermarkets’ own labels and other options and Britain’s market leader Warburtons, which accounts for more than a quarter of sales of packaged sliced bread.
The takeover announcement in August comes at a time when mass-produced sliced bread and baked goods are falling in popularity as customers reject overly processed foods and turn to more handmade loaves.
The CMA’s investigation is expected to continue until at least the end of June, which will slow the pace of the bread merger. In accounts published this summer, Hovis executives said they thought it was unlikely any deal would be signed before September 2026 and that reviews were likely to continue at least until then.
Weak consumer confidence in the UK and Europe has weighed on lower-than-expected sales over the past four months, particularly at Primark, the ABF said in its trading update on Thursday. While Primark has increased its market share, ABF said it expects the clothing brand’s sales growth to be in the low single digits in the first half of the year.
George Weston, the company’s chief executive, said: “In a challenging consumer environment, we are focusing on the factors within our control, including initiatives currently underway in Europe aimed at improving performance… While we expect challenging trading conditions to continue in the short term, we remain confident in the group’s overall prospects.”
