Kingsmill owner Associated British Foods (ABF) is set to acquire Hovis Group in a move designed to create a ‘profitable UK bread business’.
Following months of speculation, ABF announced today (15 August) that it would buy Hovis from private equity firm Endless LLP (which had taken over the business in 2020).
The financial details of the acquisition, which will combine the production and distribution activities of the two firms, have not been revealed. However, the parties claim the move will drive ‘significant cost synergies and efficiencies’ to create a profitable business that is sustainable over the long term.
ABF said the combined business will be better placed to effectively compete and to establish a stable platform for product innovation in the segments of the UK bakery category that are growing as a result of changing consumer tastes and needs. This will include improvement to existing products and expansion into new product ranges.
NPD has been thin on the ground for Kingsmill of late whereas Hovis added premium NPD to its line-up earlier this year in the form of two types of sub rolls and three loaves targeting consumers looking for higher fibre products as well as those with an interest in sourdough.
The deal comes after ABF said it was ‘evaluating strategic options’ for Allied Bakeries – which includes Kingsmill, Allinson’s, and Sunblest brands as well as own label manufacturer Speedibake – as it continued to face a very challenging market.
Profitability at Allied Bakeries has been increasingly challenged in recent years by a decline in demand for pre-sliced, packaged bread and a loss of scale in Allied Bakeries’ nationwide distribution network serving the major retailers with daily delivery of bread and bakery goods.
Hovis has also faced falling sales and rising costs with accounts for the 52 weeks ended 28 September 2024 revealing an operating loss of £6.9m, nearly double that of the year before.
ABF chief executive George Weston said the deal will “create a UK bakeries business that is both profitable and sustainable over the long term”.
“Supporting the Hovis and Kingsmill brands with well-invested and efficient operations will also enable innovation and growth. This solution will create value for shareholders, provide greater choice for consumers and increase efficiencies for customers,” Weston added.
The completion of the deal is subject to regulatory approval.
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