The Competition and Markets Authority (CMA) has given the green light to Associated British Foods (ABF) acquisition of Hovis, concluding that without the merger, ABF's Allied Bakeries would likely exit the UK bakery sector.
Background of the Deal
ABF, which owns the Kingsmill brand through its Allied Bakeries subsidiary, agreed to purchase Hovis from private equity firm Endless in August. The plan involves merging Hovis with Allied Bakeries, which also produces the Allinson's brand, to streamline production and distribution.
CMA Investigation
The regulator launched an investigation in December over potential competition concerns in the bread market. However, on Tuesday, the CMA announced that its inquiry found both companies have faced financial difficulties in recent years due to declining bread demand, rising supermarket own-brand competition, and increased costs for energy, wheat, and distribution.
Cyrus Mehta, chair of the inquiry group, stated: "Bread is a basic staple for millions, so we carefully assessed this deal. Evidence showed Allied Bakeries would likely exit the market entirely if the merger did not proceed. Therefore, we concluded the deal does not raise competition concerns."
ABF Response
An ABF spokesman welcomed the unconditional clearance, saying: "Combining with Hovis enables Allied Bakeries to continue operating and drive synergies for a sustainably profitable UK bakeries business. Despite a challenging market, we believe this can create value for shareholders, offer greater consumer choice, and support the wider economy."
