The owners of Hovis and Kingsmill have entered talks that could lead to two of the UK’s biggest bread brands merging amid “challenging” market conditions.
Associated British Foods (ABF), which owns Kingsmill parent Allied Bakeries as well as the budget clothing chain Primark, said it was in negotiations with Hovis’s private equity owner, Endless, regarding a potential deal.
If a deal is agreed, a takeover would bring Kingsmill and Hovis, two of the UK’s best-known and oldest supermarket bread brands, under one roof.
ABF told shareholders: “Allied Bakeries continues to face a very challenging market. We are evaluating strategic options for Allied Bakeries against this backdrop and we remain committed to increasing long-term shareholder value.”
The company reported last week that sales at Allied Bakeries fell in the 24 weeks to 1 March, which resulted in a higher operating loss at its UK-based grocery business. Sliced bread producers have struggled in recent years amid high inflation, coupled with changing consumer habits.
The deal would attract scrutiny from the competition watchdog because it would bring together two of the UK’s biggest breadmakers; the market leader is Warburtons.
It is a private family-owned business founded in 1876, and actively managed by the fifth generation of the Warburton family. The company is known for its eye-catching TV adverts, and even landed the Hollywood star Robert De Niro.
Hovis, which was founded in 1890, was bought by Endless in 2020 from Premier Foods, which owns the Mr Kipling brand.
Allied Bakeries dates back to 1935, when the bakery entrepreneur Willard Garfield Weston set up Allied Bakeries and its sister company Allied Mills. It also owns the Allinson’s and Sunblest brands, with eight bakeries and six depots stretching from Glasgow to London. ABF is still part-owned by the Allied’s founding family, and is run by George Weston.
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ABF’s sugar division is also struggling, while its Primark chain posted a sharp drop in UK sales last week and lost market share, as the company warned that consumer confidence was likely to worsen further amid Donald Trump’s trade wars.
ABF’s shares rose 1% in early trading on Tuesday before easing back.
