Hovis, the 134-year-old British bread maker, has been sold to private equity firm Endless after a surge in bread sales during the pandemic helped spark a bidding war.
British food maker Premier Foods, which sold a majority stake in Hovis to US private equity firm Gores Group six years ago, said it had agreed a sale which would raise £37m to First, including loan repayments.
The Hovis brand, which dates back to an 1886 flour milling innovation by Staffordshire baker Richard “Stoney” Smith, also attracted a bid from Italian food maker Newlat. Other potential buyers were also involved, according to a person familiar with the process.
Consumer trends resulting from the coronavirus pandemic have helped a sector that had previously suffered from households abandoning bread for perceived healthier options.
Bread sales soared during the first UK lockdown: they were more than 10% higher than last year in the four weeks to March 22, April 19 and May 17, 2020, according to Kantar data. Growth has since slowed, but sales remain higher than last year. A majority of four-week periods in 2019 showed declining sales.
Vinay Ghai, managing director of investment bank Baird, who worked on the sale, said: “The category has risen in value and Hovis has outperformed its category.” Online shopping has brought consumers back to well-known brands, he added.
Mr. Smith’s 1886 bread innovation, the foundation of Hovis, was to remove wheat germ from flour without losing the associated nutrients. Four years later, a national competition gave birth to the name of the brand, taken from the Latin hominis screw meaning “the strength of man”.
Hovis added a sliced version in the 1950s, and in the 1970s produced a television commercial directed by Ridley Scott, featuring nostalgic footage of a baker boy delivering bread on a bicycle to the sound of the symphony of New World by Dvorak, which has become an advertising classic.
Hovis now competes with rivals Allied and Warburtons in the UK market. Under managing director Nish Kankiwala, who was appointed six years ago, it has sold most of its milling business to focus on baking. It now employs approximately 2,700 people in eight bakeries, a flour mill and three distribution centers.
Premier, which also makes Mr Kipling’s cakes and Bird’s custard, acquired Hovis in 2007, as part of its £1.2bn takeover of rival Rank Hovis McDougall.
Premier has struggled with a heavy debt burden in recent years – its net debt was £430million at the end of March. The company canceled its entire investment in Hovis four years ago amid price competition and faltering sales in the industry. Sellers were looking for £100million for Hovis in the last sale, Sky News reported.
Leeds-based Endless also owns cake maker Bright Blue Foods, and previously owned The West Cornwall Pasty Company and pork group Karro Foods.
Francesco Santinon, Partner at Endless, added: “Hovis is the instantly recognizable British bread brand with a strong and established heritage. We have been extremely impressed with the management team and have great confidence in supporting and investing in its future as Hovis seeks to grow further in the bakery category.