The Competition and Markets Authority (CMA) has approved Associated British Foods’ (ABF) planned acquisition of Hovis following an in-depth phase two investigation.

The regulator said the deal does not raise competition concerns because ABF’s bakery business would likely leave the market if the transaction did not proceed.

The decision follows an assessment of conditions across the UK bakery sector, where suppliers have faced prolonged pressure from falling bread demand, rising operating costs and growing demand for lower-margin own-label products.

ABF, which owns the Kingsmill brand through Allied Bakeries, and Hovis are among the UK’s largest bread suppliers and both supply branded and supermarket own-brand products. During the investigation, the CMA found Allied Bakeries had recorded significant losses over the past 14 years despite attempts to improve performance.

The regulator concluded that, without the merger, Allied Bakeries would probably exit the UK market, whereby competitive pressure would be lost regardless of whether the acquisition took place.

Cyrus Mehta, chair of the independent inquiry group, said: “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. Taking that into account, we have concluded the deal does not raise competition concerns.”

Hovis, owned by private equity Endless since 2020, has been loss‑making for years, while ABF’s bakery division has also been consistently unprofitable, even though ABF as a whole remains a highly profitable FTSE‑100 group. The CMA’s own investigation lays out the financial deterioration of both businesses in detail.

ABF expects the combination of Allied Bakeries and Hovis would allow the business to continue operating while generating efficiencies to build a sustainably profitable UK bakery operation with greater capacity for innovation over the long term. The deal is estimated to be worth around £75m.

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