Bread giant Kingsmill's owner finalizes a £70 million acquisition of Hovis, preparing Britain for its largest bread brand merger.
The bread market in the UK could see a significant shift with the proposed merger of Allied Bakeries, the owner of Kingsmill, and Hovis Group. The deal, worth around £70million, is subject to regulatory approval from the Competition and Markets Authority (CMA) and was agreed by Associated British Foods (ABF).
Impact on Competition
The merger would result in the creation of Britain's second and third largest bread brands being merged, potentially overtaking Warburtons, which is currently the largest. This consolidation could concentrate market share, reducing the number of major players in the packaged sliced bread market. However, analysts argue that the market remains competitive due to supermarket own-label lines and independent brands, which could mitigate the potential negative effects on consumer choice.
Impact on Consumer Prices
The merger aims to deliver significant cost savings through the consolidation of production and distribution operations. These savings could be passed on to consumers if the company chooses to maintain competitive pricing rather than increasing prices to maximize profits. The combined business is also expected to improve operational efficiency and invest in product innovation, potentially leading to better product offerings. This could enhance consumer choice and satisfaction, although the impact on prices might depend on how these efficiencies are utilized.
Regulatory approval from the CMA is required, which will assess the merger's impact on competition and potentially impose conditions to ensure the merger does not harm consumers or the market. Union concerns about job protections suggest there might be workforce adjustments, but these are not directly linked to consumer prices.
Other Considerations
The deal comes three months after ABF first confirmed talks over a potential deal. ABF's conglomerate structure, which includes Primark and other businesses, has come under renewed focus this year. AJ Bell, an investment director, stated that ABF aims to get the best of both Hovis and Kingsmill brands.
Bread is a staple for most households, which might raise perceived risks if the deal leaves consumers out of pocket. However, AJ Bell also suggests that the deal could create value for ABF's shareholders and increase efficiencies for customers.
[1] Competition and Markets Authority [2] Allied Bakeries [3] Hovis [4] Kingsmill [5] AJ Bell
- ABF's planned merger between Allied Bakeries (Kingsmill) and Hovis could impact finance by requiring cost savings to justify the investment, with potential benefits for consumers through competitive pricing and product innovation, subject to regulatory approval from the Competition and Markets Authority (CMA).
- The consolidation of Britain's second and third largest bread brands via the merger of Allied Bakeries (Kingsmill) and Hovis could lead to changes in the business landscape, with the potential for a more competitive market and a broader offering from the combined company, as suggested by AJ Bell, an investment director.
