UK Regulators Approve Kingsmill Owner's Acquisition of Rival Hovis

The Competition and Markets Authority (CMA) has given the green light to Associated British Foods (ABF), owner of the Kingsmill brand, to acquire its rival Hovis. The decision, announced Tuesday, allows ABF to merge Hovis with its Allied Bakeries business, which also produces the Allinson’s brand.

ABF, which operates Allied Bakeries, initially struck the deal to purchase Hovis from private equity firm Endless last August. The proposed merger prompted an investigation by the CMA in December due to potential concerns regarding the new entity's market share in the bread sector.

However, the CMA's inquiry concluded that both companies have faced significant financial challenges in recent years. The decline in bread consumption, a shift towards lower-margin supermarket own-brand products, and escalating costs for energy, wheat, and distribution have impacted both firms. The regulator found that Allied Bakeries would likely exit the Great Britain and Northern Ireland markets entirely if the merger were not to proceed.

Cyrus Mehta, chairman of the CMA's independent inquiry group, stated that the decision was based on extensive evidence showing the difficult position of many UK bakeries. "Taking that into account, we have concluded the deal does not raise competition concerns," Mehta said.

An ABF spokesman welcomed the unconditional clearance, indicating that the company will now proceed with the next steps toward completing the acquisition. The spokesman highlighted that combining with Hovis will enable Allied Bakeries to continue operating, drive synergies, and create a sustainable, profitable UK bakery business. He added that this will better position the business for competition, product innovation, and value creation for shareholders, while providing consumers with greater choice and increasing efficiencies for customers.

The ABF spokesman also acknowledged the reduced demand for packaged, sliced bread due to changing consumer tastes and the challenging economic backdrop facing the bread market, but expressed belief in the continued significance of the market for nutritious, good-value staple foods.