Associated British Foods plans to spin off Primark from its food businesses, telling investors on Tuesday (April 21) that the fashion retailer will be better positioned to grow on its own.
AB Foods said financial markets will better understand and value both its food businesses, which include brands such as Ovaltine, Ryvita and Twinings, and Primark if the fashion arm has a separate London listing, with its own board and investors.
Primark and the remaining food business, known as FoodCo, are both expected to be big enough to remain in London's blue-chip index.
AB Foods' other businesses, which also include sugar, ingredients and agriculture divisions, operate across 52 countries with about 9.8 billion pounds of revenue.
Primark, founded in Dublin in 1969, trades from 486 stores in 19 markets and has annual revenues of about 9.5 billion pounds.
CEO George Weston said the demerger was not a response to trading issues and shareholders, including Wittington Investments, the holding company for the Weston family which owns just under 60% of AB Foods' equity, backed the separation.
"They think we're doing the right thing," Weston told Reuters, adding the review of the group's structure did not consider selling Primark.
For the food business, Weston said it would allow "greater understanding of the breadth and strength of our differentiated portfolio and its long-term growth opportunities".
The food division, which owns brands ranging from Kingsmill to Jordans and Mazola and Ovaltine, operates across 521 countries and generates roughly £9.8 billion of sales.
But highlighting the challenge ahead, AB Foods posted an 18% fall in first-half core profit and said full-year profit would be below the year before, reflecting concerns over consumer spending due to the Iran war, weak U.S. cooking oils and bakery ingredients markets and a more cautious sugar outlook.