Breadmakers Hovis and Kingsmill merger agreed
A deal to merge two of Britain’s biggest bread producers – Hovis and Kingsmill – has been agreed after months of talks.
Associated British Foods (ABF), the owner of Kingsmill’s parent company Allied Bakeries, has agreed a deal with investment firm Endless, which owns Hovis to acquire the brand.
The financial terms of the deal have not yet been revealed but are expected to in the coming months.
Merger talks between Hovis and Kingsmill were first revealed in May.
Kingsmill profits ‘increasingly challenged’
In a statement issued to the London Stock Exchange, the owner of Kingsmill said: “As stated at the interim results, Associated British Foods plc (ABF) has been evaluating a range of strategic options for Allied Bakeries, its UK bakery business.
“Profitability at Allied Bakeries has been increasingly challenged in recent years by a decline in demand for pre-sliced, packaged bread and a loss of scale in Allied Bakeries’ nationwide distribution network serving the major retailers with daily delivery of bread and bakery goods.
“Following this review, ABF announces today that it has reached an agreement to acquire Hovis Group Limited from Endless LLP.
“Hovis Group is an integrated bakery business, engaged in the production and distribution of bread and bakery products in the UK.
“The acquisition will combine the production and distribution activities of the two businesses, driving significant costs synergies and efficiencies, to create a profitable UK bread business that is sustainable over the long term.
“The combined business will be better placed to compete effectively and to establish a stable platform for product innovation in the segments of the UK bakery category that are growing as a result of changing consumer tastes and needs.
“This will include improvement in existing products and expansion into new product ranges.”
Losses widen at Hovis before takeover
Last month, City PM reported that losses had widened at Hovis during its latest financial year.
The company’s pre-tax losses went from £3.6m to £4.7m in the year to 28 September, 2024.
Accounts filed with Companies House also showed its revenue totalled £446.8m for the 12 months, down from the £489m it reported for the prior year.
Allied Bakeries was founded in 1935 by Wilard Garfield Weston, while Hovis was created in 1890 in Stoke-On-Trent.
The bakery was the forerunner to ABF. Allied Bakeries merged with Weston Foods in 1939, and the company name was changed to Associated British Food in 1960.
ABF owns a diverse range of brands, from Primark to Twinings Ovaltine and British Sugar.
George Weston, chief executive of ABF, said: “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.”