ABF poised to reveal result of Primark and food business demerger plan

Associated British Foods (ABF) is expected to announce the outcome of its planned demerger of Primark from its food business, a move that could reshape the company’s structure amid a challenging economic environment. The potential split would separate Primark, the fashion retailer, from ABF’s food operations, which include well-known brands such as Kingsmill bread, Twinings tea, and Patak’s spices. The announcement comes as the group faces rising costs, intense competition, and additional pressures linked to the conflict in the Middle East, which has impacted trading conditions. ABF initiated a strategic review last year with Rothschild & Co to explore options for maximizing long-term value, signaling that a demerger could unlock growth potential for both divisions. The company’s recent trading updates have been subdued, with flat sales and declining profits reported for the previous year. Analysts suggest that geopolitical tensions and their effect on global petrochemical prices may have further strained the group’s performance in the first half of the current year. George Weston, ABF’s chief executive and a member of the founding family, faces a critical decision on whether to maintain the current integrated model or proceed with the separation. Complicating the situation, ABF is also involved in a regulatory investigation concerning its proposed merger of Allied Bakeries, owner of Kingsmill, with rival Hovis. To address competition concerns, ABF has offered to sell its Northern Irish business, aiming to secure approval for the deal. Despite these challenges, market observers widely expect the Primark demerger to move forward. The recent appointment of Eoin Tonge, a seasoned finance executive with experience at ABF, Marks & Spencer, and Greencore, as Primark’s new CEO is seen as a strategic step toward preparing the fashion business for independent operation. Analysts note that the distinct nature of the food and fashion segments supports the rationale for a split, potentially allowing each to pursue tailored growth strategies in a difficult market landscape.