Bakeries Hovis and Kingsmill in potential consolidation discussions
From Bread to Merger: Hovis and Kingsmill: A Potential Alliance Amid Challenges in the British Bread Industry
The British bread market is heating up with whispers of a possible union between two giants — Hovis and Kingsmill. According to recent rumors from Sky News, Associated British Foods (ABF) and Endless, owners of Kingsmill's parent company Allied Bakeries and Hovis respectively, are reportedly engaging in talks about a potential merger.
The discussions are said to be ongoing, but as of now, a deal remains unfinalized. One potential outcome on the table could see ABF grabbing Hovis, but the details are still being hammered out. Both companies are said to be working closely with financial advisors in preparation for a potential transaction.
If the deal goes through, it would bring together two of Britain's oldest food brands to create a powerhouse in the industry. Allied Bakeries was founded by Wilard Garfield Weston in 1935, while Hovis has roots dating back to 1890.
In the driver's seat for Hovis is Jon Jenkins, a former boss at Allied.
Tough Slices for the Bread Industry
Breadmakers, like these two titans, have been feeling the burn from various factors, including inflation, specialty producers, and the rise of low-carb diets.
ABF, the FTSE 100 heavyweight that also runs Primark, mentioned in its interim results this week that Allied Bakeries had been bugged by a "very challenging market."
"We're examining strategic options for Allied Bakeries, considering this tough backdrop. We anticipate providing an update in the second half of next year," ABF stated.
Soaring wheat and flour prices due to the Russia-Ukraine conflict have added to the financial woes of these breadmakers. Hovis has previously cited these inflationary pressures in its financial reports.
In the UK, Warburtons is estimated to hold a 34% share of the branded wrapped slice bread sector, while Hovis and Allied have shares of 24% and 17% respectively. A merger between these two might create the largest player in the market, setting off alarm bells at the Competition and Markets Authority.
This potential merger represents a strategic move to weather the storm in the face of a competitive and unfavorable market for the bread industry. However, any change would require close scrutiny from regulatory bodies to ensure fair competition, consumer protection, and employment considerations.
The potential merger between Hovis and Kingsmill, two established brands in the British bread market, might be a strategic response to the challenging industry conditions that include inflation, specialty producers, and low-carb diets. With the Competition and Markets Authority likely to scrutinize such a merger carefully to maintain fair competition and consumer protection, the union could create the largest player in the market if it goes through.
In light of the "very challenging market" and soaring wheat and flour prices due to the Russia-Ukraine conflict, both companies have been seeking ways to navigate the difficult financial landscape, with ABF considering various strategic options for Allied Bakeries.
