Key summary
- Hovis and Kingsmill are nearing a £75m merger.
- The merger could generate up to £50m in annual cost savings.
- Competition concerns may arise, as the deal unites Britain’s second- and third-biggest bread brands under one owner.
Two of Britain's breadmakers could become one, as Hovis and Kingsmill are nearing a £75 million merger agreement.
Under the proposed deal, Associated British Foods, which owns Kingsmill's parent company Allied Bakeries, would acquire Hovis for around £75m from Endless, its private equity owners, Sky News reports.
The deal could wrap up as soon as the end of next week, according to banking sources with knowledge of the merger.
Banking sources said that a deal could be formally agreed to combine the businesses as early as the end of next week, although they cautioned that the complexity of the transaction meant that the timing could yet slip.
Industry sources have estimated that a combined group could benefit from up to £50m of annual cost savings from a merger.
If it does go ahead, the merger will unite two historic bread producers under common ownership.
Allied Bakeries having been founded in 1935 by Willard Garfield Weston, part of the family which continues to control ABF.
Hovis traces its history back even further, having been created in 1890 when Herbert Grime scooped a £25 prize for coming up with the name Hovis, which was derived from the Latin 'Hominis Vis' - meaning "strength of man".
In accounts filed at Companies House earlier this month, Hovis said it had "achieved positive financial progress despite continued tough trading conditions".
The company reported sales of £439.6m in the 52 weeks to 28 September last year, down from £477.6m in the 53 weeks to 30 September 2023.
"Overall bread share remained stable, despite significant price inflation and the ongoing cost-of-living crisis, demonstrating the resilience of the Hovis brand and its iconic status as one of Britain's most loved food brands," the accounts said.
The publication quoted a Hovis spokeswoman as saying that the company was "aware of some adjustments to Hovis product lines in certain stores".
"We remain fully committed to working collaboratively with our retail partners to grow our mutual businesses."
As reported earlier, the landmark industry deal is expected to attract scrutiny from the competition watchdog because it would bring together the UK’s second- and third-biggest breadmakers, creating a new market leader, ahead of Warburtons.