The UK’s competition authority has given its approval to Associated British Foods’ acquisition of rival baker Hovis.

The decision, announced today (16 June), confirms the position of the Competition and Markets Authority (CMA) when it provisionally cleared the deal in March.

In its final report, the CMA said without the deal, the “most likely outcome” would have seen Associated British Foods (ABF) quit the UK bakery market.

Cyrus Mehta, the chair of the independent inquiry group leading the investigation, said: “Taking that into account, we have concluded the deal does not raise competition concerns.”

ABF agreed to acquire Hovis in August last year from private-equity firm Endless, ending speculation over its plans for its own bread division, Allied Bakeries. The group put the Kingsmill and Sunblest brand owner put up for review last April.

The CMA launched a probe into the proposed ABF-Hovis merger in December.

In provisionally approving the deal in March, the watchdog described Allied Bakeries as a “heavily loss-making business in a structurally declining market”. At the time, it added Allied Bakeries was “not of wider strategic importance to ABF” and described the Kingsmill brand as “weak” compared to Hovis and market leader Warburtons.

Endless bought the Hovis bread business in 2020.

The CMA highlighted “significant losses” made by Allied Bakeries over the last 14 years.

According to the regulator, this stems from the “overall decline in demand for bread, the increase in demand for lower-margin private-label products and significant increases in costs, such as energy, wheat and distribution”.