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Associated British Foods (ABF), the parent company of Kingsmill, has announced its agreement to acquire Hovis Group in a significant deal poised to reshape the landscape of the UK bakery sector.

This acquisition comes in the wake of a strategic review of Allied Bakeries, ABF's bakery division, and reflects the ongoing pressures faced by the industry.

Back in May 2025, ABF has confirmed it is in discussions with private equity firm Endless, owner of the Hovis bread brand, regarding a potential merger involving ABF's Allied Bakeries business.

The proposed transaction, valued at approximately £75 million in July 2025, aims to combine two of the country’s most recognised bread brands under a single corporate umbrella.

The merger signals a pivotal shift in market dynamics, positioning ABF as the new market leader with a commanding 41% share of the UK bread market, surpassing Warburtons, which holds a 34% share.

However, the deal also underscores the challenging realities both companies have faced, as they have been grappling with unsustainable losses amid rising inflation and declining bread consumption.

James Watson, a partner at operations strategy consultancy Argon & Co, highlighted the broader implications of this acquisition. “The Hovis-Kingsmill merger is a clear sign of the pressures facing the UK bakery sector," he said. "With inflation driving up costs and bread consumption in steady decline, consolidation was always a question of when, not if."

Watson further noted that the primary objective of this merger is to enhance operational efficiency. “The real prize here is efficiency – rationalising overlapping bakery networks and cutting costs in procurement, logistics, and manufacturing,” he explained.

The Hovis-Kingsmill tie-up joins a growing list of strategic partnerships within the sector, including recent mergers like Mars-Kellanova and Greencore-Bakkavor. “The race is on to adapt – and survive,” Watson added, highlighting the urgency for companies to evolve in response to market challenges.

As ABF moves forward with this acquisition, execution will be critical. Watson warned that disrupting existing customer relationships while both brands are struggling could exacerbate their challenges.

“Longer term, the challenge is to stop managing decline and start building momentum,” he advised, calling for a focus on addressing structural issues in the bread market and responding more effectively to shifting consumer trends, such as health-conscious products and premium offerings.