UPDATE: UK CMA moves AB Foods buy of Hovis bread to in-depth probe
The UK Competition & Markets Authority on Thursday said it has moved its review of the acquisition of Hovis Group Ltd by Associated British Foods PLC to an in-depth phase 2 investigation at the request of the two bread makers.
The CMA launched its phase 1 probe of the merger on December 19 and had until February 19 to reach a decision whether to clear the deal or move to a phase 2 investigation. However, the regulator on Thursday said that AB Foods and Hovis requested a ’fast-track’ reference to a phase 2 investigation, and the CMA accepted their request.
The phase 1 probe, in CMA’s standard language, was to determine whether or not the merger ‘may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services’.
Back in May, AB Foods, a London-based food processing and clothing retailing business, confirmed talks with Hovis-owner Leeds-based Endless LLP, for a potential acquisition. At the time, AB Foods said it was evaluating strategic options for its Allied Bakeries division, as it continued to face a ‘very challenging market’.
Allied Bakeries owns the bread brands Kingsmill, Allinson’s, and Sunblest. It also produces own-label bakery ranges for major UK supermarkets.
In August, AB Foods confirmed it will combine Hovis with Allied Bakeries to create a ‘profitable UK bread business that is sustainable over the long term’. No financial details of the deal were disclosed.
Endless bought Buckinghamshire-based Hovis in 2020 for an undisclosed price.
According to Companies House data, the pretax loss at Hovis widened to £4.7 million in the 52 weeks to September 28, 2024 from £3.6 million the year before, as finance expenses rose to £7.6 million from £6.8 million. Revenue decreased 8.6% to £446.8 million from £489.0 million.
AB Foods shares were down 12% to 1,903.42 pence in London on Thursday morning. The wider FTSE 100 index was down 0.3%.
AB Foods separately on Thursday released a Christmas trading update. It said its fast-fashion retailing division, Primark, had a ‘challenging start’ to its financial year with a ‘mixed performance’. Primark delivered ‘encouraging’ UK sales growth of around 3% in the 16 weeks to January 3, with like-for-like sales growth of 1.7% in a ‘difficult clothing market’, AB Foods said.
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