The Competition & Markets Authority has taken the first step of its inquiry into Associated British Foods’ proposed takeover of Hovis.
Opening up a preliminary ‘invitation to comment’, the CMA said it would consider any initial views on the impact the transaction could have on competition in the UK.
Interested parties were encouraged to submit their thoughts before 2 October, at which point the CMA will start preparations for the official launch of a Phase 1 merger inquiry to consider industry viewpoints.
ABF revealed its intention to buy Hovis on 15 August, when CEO George Weston said the transaction would “create a UK bakeries business that is both profitable and sustainable over the long term”.
The merger would bring together Britain’s second and third-largest bread brands, though the combined entity would still fall behind market leader Warburtons in till share.
Both Hovis and Kingsmill have struggled in recent years, leading market analysts to hope the CMA will permit the deal to prevent either going bust.
Allied Bakeries currently loses ABF around £30m a year, and Hovis has made a loss most years since its acquisition by PE firm Endless LLP.
Panmure Liberum analyst Anubhav Malhotra said: “We expect the regulator to take the view that, in the absence of a merger, only one of the two companies would survive, thereby reducing competition in any case.”
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