The UK competition watchdog has ramped up its investigation into a £75 million takeover deal that will result in the owner of Kingsmill snapping up its sliced bread rival Hovis.
Associated British Foods (ABF), which also owns the Primark clothing chain, confirmed plans to buy Hovis from its private equity owners Endless in August, combining the UK’s second and third largest bread brands.
The Competition and Markets Authority (CMA) has now launched an in-depth investigation into whether the deal could harm consumers, potentially leading to reduced choice and higher prices on grocery shelves. It follows a request by the two companies to fast-track the review of the merger.
ABF said in a statement, “Our priority is to achieve regulatory clearance as efficiently as possible and we are pleased to have agreed with the CMA that we will fast-track to the in-depth and detailed final phase of their merger review. We will continue to work constructively with the CMA to demonstrate the benefits of the transaction.”
The news came as ABF issued a profit warning, saying it expected adjusted operating profit for the wider group to be below last year.
ABF noted in a trading update today (Jan 8) that weak consumer confidence in the UK and Europe had weighed on sales, particularly at Primark, which were lower than expected over the past four months. While Primark gained market share, ABF said it expected sales growth at the clothing brand to be in the low single digits in the first half of the year.
Its chief executive, George Weston, said, “In a challenging consumer environment, our focus is on factors within our control, including initiatives now under way in Europe aimed at improving performance … While we expect the tough trading conditions to continue in the short term, we remain confident in the overall prospects for the group.”