UK's CMA flags concerns on AB Foods/Hovis deal in N Ireland

(Sharecast News) - Britain's competition watchdog on Thursday said Associated British Foods' deal to buy rival bakery Hovis raised competition concerns in Northern Ireland but gave the purchase a provisional green light in Great Britain after finding ABF's Allied Bakeries would close irrespective of any outcome. The Competition and Markets Authority (CMA) said an alternative buyer would keep the business competing with bread maker Hovis in Northern Ireland.

The regulator also found that Allied Bakeries would close down if the merger did not go ahead, meaning competition between the two bakery suppliers would be lost in Great Britain regardless of the deal's outcome.

It found that Allied Bakeries - which owns the Kingsmill brand - was a "heavily loss-making business in a structurally declining market and the bakery business is not of wider strategic importance to ABF", with the Kingsmill brand considered to be weak compared to other brands such as Warburtons and Hovis, contributing to a significant decline in branded volumes.

The conglomerate, which also owns the Kingsmill, Allinson's, and Sunblestbrands along with the Primark clothing chain, last August announced its deal to buy 135-year-old Hovis for an undisclosed sum.

Hovis is owned by UK private equity outfit Endless.

"We considered the impact of the Merger in GB and NI separately, as we found that conditions of competition in these products are substantially different between (the two)," the CMA said in a statement.

"In particular, evidence shows that the competitor set differs, with the market leader in GB, Warburtons, having only very recently entered NI; and there are material differences in consumer preferences, including the popularity of particular bakery products and the presence and popularity of particular brands and private label products in NI."

The companies have until April 9 to submit a remedy proposal to address the CMA's concerns around the supply of plant bread, pancakes, potato farls and soda farls in Northern Ireland.

Reporting by Frank Prenesti for Sharecast.com