LONDON – Just weeks after Unilever announced the merger of its foods division with McCormick & Co., Associated British Foods has confirmed plans to separate its own foods business from fashion retailer Primark.
ABF announced last November it was contemplating splitting the two businesses, and said Tuesday the demerger was going ahead, with shareholders able to hold stakes in both publicly-listed entities.
Wittington Investments, which is owned by the Weston family and has majority ownership of ABF, said it was “supportive of the proposed demerger,” and remains committed to maintaining majority ownership of Primark and the separate food company, which for the moment is called FoodCo.
The board said one-off separation and transaction costs are expected to be in the region of 75 million pounds, and the demerger will deliver a number of benefits to each business, making investing easier and more transparent for shareholders.
The board also said it was confident in the long-term prospects of both businesses.
Going forward, Primark and FoodCo will each be listed on the commercial companies category of the London Stock Exchange and, given their scale, ABF anticipates that both entities will be included in the FTSE 100 index of top-performing companies.
Following the demerger, Primark will retain its name, while FoodCo will be called Associated British Foods.
Primark has 486 retail stores across 19 markets, with approximately 9.5 billion pounds in annual revenue and more than 83,000 employees.
FoodCo operates globally across 521 countries, with approximately 9.8 billion pounds in annual revenue and more than 55,000 employees. Its main brands include Twinings tea, Patak’s sauces and Jordans breakfast cereals.
The separation of Primark from ABF is expected to be effected by way of a dividend demerger, which is set to become effective before the end of the 2027 calendar year.
Primark has been opening slick flagships in major cities in Europe and the U.S.
Primark
George Weston will serve as chief executive of FoodCo, while Eoin Tonge will take up a similar role at Primark.
Weston, who is currently chief executive of ABF, said the separation was an important step in the company’s evolution.
“For our food business, the separation will enable greater understanding of the breadth and strength of our differentiated portfolio and its long-term growth opportunities as the only FTSE100 pure-play food producer,” he said.
For Primark, Weston added, the separation will enable “the creation of appropriate governance to maximize the future potential offered by Primark’s powerful brand, strong customer proposition and opportunities in existing and new markets.”
In the first half ended Feb. 28, ABF said Primark sales grew 2 percent, with new store openings contributing 4 percent to growth. In the U.K., like-for-like sales grew 1.3 percent and Primark gained market share “in a difficult retail environment, reflecting strong progress to re-energize our customer proposition.”
In Europe, where consumer confidence remains weak, like-for-like sales declined 5.6 percent. The company said adjusted operating margin was 10.1 percent, and there was a “significant increase in investment across product, marketing, digital and technology to drive like-for-like sales growth.”
ABF group revenue, including food, was down 2 percent to 9.5 billion pounds, although the company said it was expecting an improvement in the second half.
Last month, Unilever confirmed the merger of its foods business with U.S. spices and flavors maker McCormick & Co., part of its shift to become a beauty- and wellness-focused powerhouse.
The combined foods business will be led by the McCormick chief executive and chief financial officers, with senior management representation from Unilever Foods.
It will house brands including McCormick, Knorr and Hellmann’s, and “high growth potential” names such as Cholula, Maille and Frank’s, as part of a global portfolio with combined revenues of $20 billion.
