FTSE 100 giant Associated British Foods has been given the green light for a £75m takeover of Hovis, creating the UK’s biggest bread brand.

Associated British Foods (ABF) has been cleared to snap up Hovis after the competition watchdog accepted that the foods giant would likely exit the bakery sector in Great Britain and Northern Ireland if the deal did not go ahead.

The Competition and Markets Authority (CMA) announced on Tuesday that the takeover does not raise competition concerns.

The decision is a major boost for the London-listed conglomerate, whose food businesses will take centre stage once it spins off Primark, the fast-fashion retailer it has owned since 1969.

ABF, which owns the Kingsmill brand, supplies bread and other bakery goods across the UK. 

Its UK-based business, Allied Bakeries (AB), and Hovis are major suppliers of own-brand bakery products to big chain supermarkets. 

UK’s biggest bread brand rises

Proposed in August last year, the takeover was formally investigated by the competition regulator in December amid concerns around the group’s future slice of the bread market should the deal go ahead.

The investigation found that bread suppliers in the UK have faced longstanding challenges, including declining demand, increased demand for lower-margin supermarket own brand bread and significant increases in costs. 

Cyrus Mehta, chair of the probe into the merger, said the deal “does not raise competition concerns” because Allied Bakeries “would likely leave the market entirely” if the deal was quashed.

He said: “Bread is a basic staple for millions of people, which is why it is important we looked carefully at this deal and assessed the competition implications for households across the UK.”

ABF and Hovis revenues sliced

ABF’s revenue dropped by nine per cent to £9.5bn in the six months to the end of February, according to its most recent results. Hovis similarly recorded an eight per cent fall in revenue to £440m in the year to September 2024.

A spokesperson for ABF said: “We welcome the unconditional clearance provided by the CMA and we will now work on next steps towards completion.

“Combining with Hovis enables Allied Bakeries to continue operating as well as drive significant synergies to create a sustainably profitable UK bakeries business over the long term that is better placed to compete and establish a platform for product innovation,” they said.

ABF was founded by W. Garfield Weston in 1935 as Food Investments Limited, before listing on the London Stock Exchange in 1994.

In April, the company – which is controlled by the billionaire Weston family – said it plans to split off Primark in an “important step in the evolution” of the group.