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Associated British Foods (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 move could bring two of the UK’s most recognised packaged bread brands, Kingsmill and Hovis, under the same ownership.

ABF's confirmation follows ongoing speculation surrounding the future of Allied Bakeries, which has faced increasing commercial pressures in recent years, prompting ABF to explore strategic options for the business. A potential merger with Hovis – which Endless acquired from Premier Foods and Gores Group in 2020 – would signal a major consolidation in the UK bakery sector.

ABF has acknowledged the challenges in the bakery sector, citing evolving consumer preferences, rising input costs and intensified competition. The UK packaged bread market has been impacted by growing interest in lower-carb diets, wellness trends and a shift towards artisanal and sourdough-style alternatives.

“Associated British Foods notes recent media speculation and confirms that it is in discussions with Endless LLP regarding a potential transaction,” ABF said in a statement. “However, there is no certainty that a transaction will be concluded, nor as to the terms of such a transaction.”

If the merger proceeds, it could create a new market leader in the packaged bread category, potentially outpacing category giant Warburtons, a private family-owned firm established in 1876.

Hovis was founded in Macclesfield in 1886, while Allied Bakeries was formed in 1935 and is still partially owned by its founding family. It launched Kingsmill as its flagship bread brand.

“Allied Bakeries continues to face a very challenging market,” ABF said. “We are evaluating strategic options against this backdrop and remain committed to increasing long-term shareholder value. A further announcement will be made as and when appropriate.”

Any consolidation between Allied Bakeries and Hovis could have broad implications for the supermarket bakery sector and will likely face scrutiny from the UK's competition watchdog, as it would create a new leader within the market.