Hovis takeover bid investigated by competition watchdog

The proposed deal would create a major player in the baking sector

The deal will create a major player in the baking sector, to compete against Warburton’s and supermarket own-label products. (Getty)

The UK’s competition watchdog has formally launched an investigation into Associated British Foods’ (ABF) proposed takeover of the historic Hovis brand.

This move comes after ABF struck a deal in August to acquire the 135-year-old bakery from its US private equity owner, Endless.

The acquisition would see Hovis merge with ABF’s existing Allied Bakeries business, which is responsible for producing popular brands such as Kingsmill and Allinson’s bread.

This consolidation is expected to create a significant new player within the baking sector, poised to compete directly with established names like Warburton’s and various supermarket own-label products.

Anticipation for a regulatory review by the Competition and Markets Authority (CMA) had been high.

The watchdog’s formal phase one investigation, initiated on Friday, follows a September request for comments from parties linked to the deal regarding its potential impact on market competition.

ABF aims to buy Hovis and combine it with its bakery business (Premier Foods/PA)

The watchdog said it will confirm whether the merger needs a more thorough phase two probe by February 19.

An ABF spokeswoman said: “This formal step is an important milestone and follows ABF working constructively with the CMA to outline the challenges and changes taking place in the UK’s bakery sector.

“ABF will continue to work closely with the CMA to ensure this case is run as efficiently as possible and to demonstrate why this transaction will help to create a more sustainable competitor that is better able to invest, innovate and deliver for customers.”

The Hovis deal comes after ABF launched a strategic review of the Allied Bakeries business, which has been loss-making in recent years because of cost pressures and changing consumer demand.

It said the merger would combine “the production and distribution activities” of the businesses and lead to “significant costs synergies and efficiencies”.