Two of the UK’s best-known bread brands near historic £75m merger
Two of Britain’s breadmakers could become one, as Hovis and Kingsmill are nearing a merger agreement.
Under the proposed deal, Associated British Foods, which owns Kingsmill’s parent company Allied Bakeries, would acquire Hovis for around £75million from Endless, its private equity owners, Sky News reports.
The deal could wrap up as soon as the end of next week, according to banking sources with knowledge of the merger.
Due to the complex nature of the transaction, any deal could take longer to be reached, they said.
The two bakers could make cost savings of as much as £50million per year as a result of the merger, it was reported.
In May, it was revealed that talks were in progress between the two companies.
Best of both: Breadmakers Hovis and Kingsmill are nearing an agreement for a merger of two of the country’s biggest bread bakers
ABF said it was also exploring other options for Allied Bakeries’ future that did not involve Hovis.
ABF said: ‘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 UK bakery market is worth some £5billion, with the equivalent of 11 million loaves being sold each day.
However, the market has contracted in recent years on the back of changing diets and higher bread prices.
A merger would see the combined group take the largest market share in the wrapped sliced bread sector. Hovis currently holds a 24 per cent market share, while Allied holds 17 per cent.
Combined, the two would surpass the market leader Warburtons, which holds a 34 per cent stake in the market.
Sky reports that Warburtons would maintain a higher annual turnover due to its wider product range.
A potential deal would likely face probing from the competition watchdog, as a merger would cut the number of major players in the market from three to two.
‘What the Competition & Markets Authority may make of matters remains to be seen,’ Shore Capital’s Clive Black said in May.
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