UK food producer Associated British Foods (ABF) has reached an agreement to acquire Hovis Group Limited from Endless LLP.
Bakery business Hovis, which produces and distributes bread and bakery products in the UK, will be acquired after profitability at ABF’s Allied Bakeries business has been “increasingly challenged”.
ABF reported that the decline in profitability in recent years was due to a decline in demand for pre-sliced, packaged bread and a loss of scale in Allied Bakeries’ nationwide distribution network, which serves retailers with daily delivery of bread and bakery goods.
The acquisition will combine the production and distribution activities of the two businesses, driving significant costs synergies and efficiencies, aiming to create a profitable UK bread business that is “sustainable over the long term”.
ABF stated that the combined business would be “better placed to compete effectively” and to establish a platform for product innovation in the segments of the UK bakery category that are growing as a result of changing consumer tastes and needs.
George Weston, chief executive of Associated British Foods, said: “This transaction will create a UK bakeries business that is both profitable and sustainable over the long term. Supporting the Hovis and Kingsmill brands with well-invested and efficient operations will also enable innovation and growth. This solution will create value for shareholders, provide greater choice for consumers and increase efficiencies for customers.”
Unite the Union general secretary Sharon Graham stated: “While there is still a long way to go before any buyout happens, Kingsmill and Hovis must ensure that jobs are protected. Unite represents workers at both companies and we will not tolerate attacks on jobs, pay or conditions. Unite will be working to ensure that Kingsmill and Hovis fully involve the union in any decisions that impact our members.”
Hovis previously mentioned in its annual report that it was unlikely that the transaction would be completed during the current concern period. The completion of the transaction is subject to regulatory approval.
