Hovis and Kingsmill merger imminent.

(Image: Getty/Sinan Kocaslan)

Bread producers Hovis and Kingsmill close in on historic merger

Hovis & Kingsmill merger facts

• ABF set to buy Hovis for £75m (€86.3m) deal
• Deal could close as early as next week
• Merger would create UK bread market leader with 41% share
• Up to £50m in annual savings expected from consolidation
• Move reflects pressure on bakery sector from inflation and falling demand
• Part of wider M&A trend in food and drink industry

Associated British Foods (ABF), which owns Kingsmill via parent company Allied Bakeries, is on the verge of closing a deal to buy rival brand Hovis.

That’s according to a Sky News report.

Sky News sources say the £75m (€86.3m) merger could be formally agreed as early as the end of next week. Though they cautioned the complexity of the transaction may shift timings.

If it does go ahead, the merger will unite two of Europe’s oldest bread producers – Allied Bakeries, founded by Willard Garfield Weston in 1935, and Hovis, founded by Richard “Stoney” Smith, in 1886.

“The Hovis-Kingsmill merger is a clear sign of the pressures facing the UK bakery sector,” says James Watson, UK partner at global operations strategy and transformation consultancy, Argon & Co. “With inflation driving up costs and bread consumption in steady decline, consolidation was always a question of when, not if.

Watson goes on to highlight that the deal would give ABF a new market leader, with 41% share, overtaking Warburtons’ 34%. But behind the headline is a tough reality: both businesses have been making unsustainable losses.

“The real prize here is efficiency,” says Watson. “Rationalising overlapping bakery networks and cutting costs in procurement, logistics, and manufacturing.”

In fact, it’s estimated the combined group could save up to £50m in annual costs.

“This is part of a wider pattern across food and drink, where M&A is being used to counter cost pressures and capture growth in more resilient categories,” says Watson.

Though he warns that execution will be everything. Disrupting existing customer relationships now, while both brands are losing share, would risk compounding the problem.

The Hovis-Kingsmill merger now joins a growing list of strategic pairings, including Mars-Kellanova and Greencore-Bakkavor. The race is on to adapt, and survive.

Looking to the future, Watson says the real challenge is to stop managing decline and start building momentum. That means addressing structural issues in the bread market and responding faster to shifting consumer trends – whether that’s health, speciality products, or premium lines.

As ABF moves closer to sealing the Hovis deal, the merger marks a pivotal moment for the bakery sector. Success will hinge not just on cost-cutting, but on revitalising consumer interest and adapting to a changing market.

Stay tuned to find out more.