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Associated British Foods (ABF), the owner of Kingsmill, has announced an agreement to acquire rival breadmaker Hovis, potentially creating the UK’s largest bread brand through a merger of the two companies.
ABF, which also owns prominent brands like Primark, Ryvita, and Twinings, intends to implement cost-cutting measures to restore profitability to both businesses, which are currently operating at a loss.
The Unite union, representing workers at both Hovis and Kingsmill, has issued a warning against any actions that would negatively impact jobs, wages, or working conditions.
Warburtons currently leads the UK bread market, and the proposed deal is subject to approval from the Competition and Markets Authority.
Industry analysts suggest that sales of traditional packaged bread, such as Kingsmill and Hovis, have declined due to shifting consumer preferences towards artisanal breads like sourdough and ciabatta.
Moreover, the increasing popularity of high-protein diets has led some British consumers to reduce their carbohydrate intake, impacting the demand for sandwiches and toast.
In a statement to investors, ABF revealed that it had reached an agreement to purchase Hovis from its current private equity owner, Endless. Sources at the BBC estimate the deal to be valued at approximately £75 million.
ABF asserts that the combined entity will be “better placed to compete effectively” and innovate with new products to meet evolving consumer demands.
Allied Bakeries, ABF’s bread division responsible for Kingsmill and Allinson’s, initially confirmed discussions regarding a potential acquisition three months prior.
Hovis, with a history dating back to 1890, was acquired by Endless in 2020 from Premier Foods, the owner of the Mr Kipling brand.
ABF anticipates that the acquisition will yield “significant cost synergies and efficiencies,” contributing to the establishment of a sustainably profitable bread business.
George Weston, chief executive of ABF, stated, “This solution will create value for shareholders, provide greater choice for consumers and increase efficiencies for customers.”
However, Unite general secretary Sharon Graham emphasized the need for job protection, stating, “While there is still a long way to go before any buyout happens, Hovis and Kingsmill must ensure that jobs are protected.”
She affirmed Unite’s commitment to ensuring the union’s full involvement in any decisions affecting its members at both brands.
The transaction is contingent upon approval from the Competition and Markets Authority.
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