CMA gives green light to ABF and Hovis merger
The Competition and Markets Authority (CMA) has given the go ahead for the merger between Allied Bakeries owner, Associated British Foods plc (ABF) and Hovis.
The CMA’s independent inquiry group found that Allied Bakeries would exit the market entirely in Northern Ireland and Great Britain if the merger did not go ahead.
In its final report published on 16th June, the CMA stated that competitive pressure from Allied Bakeries would be lost with or without the merger and so found that the merger does not raise competition concerns.
Since the start of the investigation, the inquiry group heard that bread suppliers across the UK are facing longstanding challenges, such as declining demand as well as significant increases in costs.
Evidence gathered shows that Allied Bakeries and Hovis have each faced financial challenges, with Allied Bakeries making significant losses over the last 14 years, despite exploring a range of options to improve performance, due to the overall decline in bread demand, the increase in demand for lower-margin private-label products and significant rises in costs, such as energy, wheat and distribution.
Chair of the independent inquiry group leading the investigation, Cyrus Mehta said with bread being a basic staple for millions of people, it was important to look carefully at the deal and assess competition implications for households in the UK.
“On the basis of the wide range of evidence we received, which showed the difficult position many UK-based bakeries are in, we found Allied Bakeries – owned by ABF – would likely leave the market entirely if the deal did not proceed,” said Cyrus Mehta.
“Taking that into account, we have concluded the deal does not raise competition concerns.”
