UK Competition Watchdog Approves ABF’s Acquisition of Hovis Amid Market Changes
Overview of the ABF-Hovis Acquisition and Regulatory Approval
Background and Deal Announcement
June 16 (Reuters) - Britain's competition watchdog cleared Associated British Foods' acquisition of rival Hovis on Tuesday, after finding that ABF's bakery division would likely exit the market entirely if the deal did not proceed.
ABF announced its deal to buy 135-year-old bread maker Hovis for an undisclosed sum in August last year, with the Competition and Markets Authority (CMA) launching its investigation in December.
Key Details of the CMA Investigation
Provisional Clearance and Market Concerns
Here are some details:
• The CMA provisionally cleared the deal in Britain in March while still raising competition concerns in Northern Ireland, but has now found that ABF's bakery division, Allied Bakeries, would exit both markets entirely without the merger
Market Position of Allied Bakeries and Hovis
• Allied Bakeries and Hovis are significant suppliers of own-brand bakery products to major UK supermarkets
Challenges Facing Allied Bakeries
• Allied Bakeries, which owns Allinson's and Sunblest brands, has sustained significant losses over 14 years due to falling bread demand, a shift to lower-margin private-label products, and rising costs for energy, wheat, and distribution
Structural Challenges in the UK Bakery Sector
• The Competition and Markets Authority said its clearance followed evidence of significant structural challenges facing the UK bakery sector
Statement from the CMA Inquiry Group
• "On the basis of the wide range of evidence we received, which showed the difficult position many UK-based bakeries are in, we found Allied Bakeries - owned by ABF - would likely leave the market entirely if the deal did not proceed," Cyrus Mehta, chair of the independent inquiry group leading the investigation, said.
Reporting
(Reporting by Nithyashree R B in Bengaluru)
