Allied sale rumours mount as plant bakery battle hots up
23 November, 2007
Speculation was mounting in the national press this week over the future of Allied Bakeries, if parent Associated British Foods (ABF) should decide to sell the business.
Kingsmill-owner ABF is said to be looking at a possible disposal of its bakeries - the business it was founded from in 1935.Primark owner ABF now considers the bread business "noncore and non-strategic", according to a report in The Sunday Times last week, which ABF has refused to comment on.Analyst Martin Deboo of Investec told British Baker that he did not believe there was room for Warburtons, Hovis, own-label and Allied in the market, which was leading to a "bloodbath in profits" as cost increases were absorbed in a battle to gain market share.He said: "ABF won't stay in the market. Allied will be sold to a third party or private equity firm. The Kingsmill relaunch in February has not been the solution, only adding 1% in market share. We think there is over-capacity in the plant baking industry. Market volumes are down, but you have Warburtons adding new capacity."But another industry source questioned whether the Allied business would be attractive to a buyer. He said: "If Allied can't make money itself at the scale it is, it is not that attractive for someone else to purchase. And how do you value a business when it is not making money? Premier Foods could buy it and rationalise the Hovis and Allied Bakeries plants, but the deal would have to be cleared by competition authorities." Allied Bakeries' chief executive Brian Robinson said: "Things being what they are in the corporate world I cannot comment at all."Bread accounts for around 7% of ABF's business, with the company also owning a raft of varied brands, from fashion retailer Primark and malt drink Ovaltine to Twinings tea and British Sugar.Deboo said: "ABF has an emotional attachment to the UK bread market, but with the seductive charms of Primark's bras and knickers growing, we think ABF might seek an exit from bread to a third party."