The UK's Competition and Markets Authority has cleared Associated British Foods' acquisition of Hovis, ruling that the deal does not raise competition concerns. The regulator concluded that ABF's bakery arm would likely exit the UK market entirely if the takeover did not proceed.
The CMA's clearance allows for the consolidation of major bread brands under one owner, potentially impacting market dynamics and consumer choice in a sector already facing significant cost pressures and declining demand.
The Competition and Markets Authority (CMA) has cleared Associated British Foods' (ABF) proposed £75 million takeover of Hovis, a move that will create the UK's largest bread brand.
The watchdog's decision was based on the conclusion that if the deal did not go ahead, ABF's UK bakery arm, Allied Bakeries (AB), would likely exit the market entirely. This scenario, the CMA stated, would particularly affect lower-income consumers who rely on bread as a basic staple.
ABF's Allied Bakeries, which owns brands such as Kingsmill, Allinson's, and Sunblest, supplies bread and other baked goods nationwide and to major supermarkets. However, the company has experienced losses over the past 14 years due to declining demand for sliced bread, a shift towards lower-margin private-label products, and increased operational costs like energy, wheat, and distribution.
Hovis, acquired by private equity firm Endless in 2020, also owns the Mother's Pride and Ormo brands. The company reported pre-tax losses of £4.7 million for the year ending September 28, 2024, an increase from £3.6 million the previous year.
Cyrus Mehta, chair of the CMA's independent inquiry group, emphasized the importance of carefully assessing the deal given bread's status as a staple for millions. He noted that evidence indicated Allied Bakeries' likely market exit without the acquisition, leading to the conclusion that the deal would not harm competition.