Associated British Foods has rebranded its UK bread division as Hovis Bakeries after completing the acquisition of rival baker Hovis Group.
Hovis Group has now been merged with Allied Bakeries, the UK baking arm of ABF.
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In a stock exchange filing issued today (8 July), ABF said the deal would create a “sustainably profitable UK bakeries business for the long term with an enhanced market position”.
The company said the combined operations would channel investment into areas of the UK bakery market that are expanding because of “changing consumer tastes and needs, including healthy options”.
ABF had struck a deal to buy Hovis from private-equity firm Endless in August last year.
The acquisition was cleared by the Competition and Markets Authority in June.
In its final findings, the regulator said the transaction did not present competition issues and said that, without the deal, the “most likely outcome” would have been ABF exiting the UK bakery sector.
ABF had placed the owner of the Kingsmill and Sunblest brands under review in April last year.
In December, the CMA opened an investigation into the proposed ABF-Hovis deal in December.
When the watchdog gave provisional approval in March, it characterised Allied Bakeries as a “heavily loss-making business in a structurally declining market”. It also said at the time that Allied Bakeries was “not of wider strategic importance to ABF” and described the Kingsmill brand as “weak” in comparison with Hovis and market leader Warburtons.
Endless acquired the Hovis bread business in 2020.
ABF said it expects the Hovis purchase to be “marginally dilutive” to earnings in financial year 2027, before becoming “accretive thereafter”.
George Weston, the CEO of ABF, said: “By combining our expertise, scale and capabilities with targeted investment into new product categories, this business can return to growth, provide greater consumer choice, serve our customers better than ever and so create value for shareholders.”
The process of integrating the two businesses will begin “shortly”.
As per the filing, the combination is expected to generate “substantial operational synergies and efficiencies” across manufacturing and distribution.
“These benefits will drive improved profitability, strengthen the resilience of the combined business and enable investment in brands and product innovation.”
