Competition and Markets Authority to probe ABF’s deal to buy Hovis

The UK competition watchdog has launched an investigation into the takeover of Hovis by Associated British Foods (ABF).

In August, ABF struck a deal to buy the 135-year-old business from US private equity owner Endless.

ABF said it would merge Hovis with its own Allied Bakeries business, which makes Kingsmill and Allinson’s bread.

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

It had been widely expected that the Competition and Markets Authority (CMA) would look into the process as a result.

On Friday, the regulator launched a formal phase one investigation into the deal.

It comes after the CMA called for parties linked to the deal to comment on the potential impact of the move on competition in the sector in September.

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”.