The UK's competition watchdog has intensified its scrutiny of a major bakery sector deal, launching a full-scale investigation into the planned £75m takeover of Hovis by the owner of Kingsmill.
CMA Escalates Merger Scrutiny
The Competition and Markets Authority (CMA) confirmed on Thursday that it is moving to a "phase 2" in-depth investigation into the proposed acquisition. This step follows initial concerns raised in December and will assess whether combining the UK's second- and third-largest bread brands could substantially lessen competition.
The regulator's core focus is whether the merger could lead to reduced choice and higher prices for consumers on supermarket shelves. It must determine if Kingsmill and Hovis face enough competitive pressure from rivals, including the market leader Warburtons—which holds over a quarter of packaged sliced bread sales—and from supermarkets' own-label products.
Deal Progress Slows as ABF Issues Profit Warning
The announcement of the CMA's probe coincided with a profit warning from Associated British Foods (ABF), the conglomerate behind both Primark and Kingsmill. ABF stated that its adjusted operating profit for the group is expected to be below last year's level.
This news triggered an 11% drop in ABF's share price on Thursday morning. The company cited "weak" consumer confidence in the UK and Europe, which particularly impacted Primark's sales over the past four months. While Primark gained market share, ABF anticipates only "low single-digit" sales growth for the brand in the first half of the year.
Long Road Ahead for Bread Merger
The CMA's phase 2 investigation is scheduled to run until at least the end of June, significantly slowing the merger process. However, Hovis directors had previously indicated in summer accounts that they believed any deal was "unlikely to be concluded" before September 2026, with regulatory reviews likely continuing until at least that date.
The proposed takeover, announced in August, comes at a challenging time for the mass-produced bread market. Consumers are increasingly turning away from ultra-processed foods in favour of more artisanal loaves, leading to a drop in popularity for pre-sliced, packaged products.
ABF's chief executive, George Weston, acknowledged the tough trading conditions but expressed confidence in the group's long-term prospects. "In a challenging consumer environment, our focus is on factors within our control," he stated.
