Kingsmill owner Associated British Foods (ABF) is to snap up Hovis Group and merge the historic business with its own bakery arm.
ABF, which also owns brands including Ryvita and Twinings, said it has “reached an agreement” to buy Hovis from private equity owner Endless.
The multinational told investors on Friday that the deal will “combine” the production and distribution activities of Hovis and its Allied Bakeries business, which makes Kingsmill and Allinson’s bread.
The move will lead to “significant costs synergies and efficiencies” in an effort to create a sustainably profitable bread business.
Hovis, which was founded in 1890, was bought by Endless in 2020 from Premier Foods, which owns the Mr Kipling brand.
It comes three months after ABF first confirmed talks over a potential deal.
The move follows a strategic review of the Allied Bakeries business, which has been loss-making in recent years due to cost pressures and changing consumer demand.
ABF said: “The combined business will be better placed to compete effectively and to establish a stable platform for product innovation in the segments of the UK bakery category that are growing as a result of changing consumer tastes and needs.”
The food firm also said the deal would lead to the expansion of new product range and improvements in current products.
George Weston, chief executive of ABF, said: “This transaction will create a UK bakeries business that is both profitable and sustainable over the long term.
“Supporting the Hovis and Kingsmill brands with well-invested and efficient operations will also enable innovation and growth.
“This solution will create value for shareholders, provide greater choice for consumers and increase efficiencies for customers.”
The deal is subject to regulatory approval and is likely attract the attention of the Competition and Markets Authority (CMA), combining two of the larger bread makers in the country behind the market leader, Warburtons.
