The demerger will separate Primark from ABF's food operations, creating two distinct publicly traded companies. According to major media reports, Eoin Tonge will lead Primark after the split, while George Weston will remain chief executive of ABF. The Weston family, which controls ABF, will retain ownership of both entities through charitable trusts. According to The Independent - Main, Chris Beckett described the separation as leaving two FTSE 100 companies that are both ultimately family-owned, underlining that this is more about structure than strategy.
According to a single source, ABF's half-year results show profits down 9% to £632 million. The company's shares fell 83p to 1801p on the demerger news and have declined 21% over the last five years. Post-demerger, Primark could be valued at £9 billion on the stock market, while the food company might reach £4 billion, with the combined business still worth around £13 billion.
This is an important step in the evolution of ABF. 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 FTSE 100 pure play food producer.
The decision follows a strategic review that ABF announced in November last year, conducted with advisory firm Rothschild & Co. According to The Independent - Main, Dan Coatsworth described ABF as having finally buckled and pressed the button on the demerger. The timing remains uncertain, with no specific date announced for when the demerger will be finalized or whether shareholder approval will be required.
Business challenges have mounted for both divisions. ABF admitted in January that annual sales were likely to be flat year-on-year with profits down. The conflict in the Middle East is expected to have added to trading pressures, and according to The Guardian - Business, Darren Shirley described potential additional headwinds post the start of the Iran conflict, including longer-term impacts on petrochemical prices. Primark faces pressure from online rivals such as Shein and Temu, along with structural pressures particularly in Germany.
The demerger decision had been long expected but is not the value-unlocking moment some might hope for.
ABF's food division is embroiled in a competition watchdog investigation into a planned merger between its Allied Bakeries and rival Hovis. The company has offered to put its Northern Irish business up for sale to allay competition concerns, though the outcome of the investigation remains unclear.
Analysts expressed skepticism about the demerger's value creation potential. According to The Independent - Main, Chris Beckett described it as not the value-unlocking moment some might hope for, noting that Primark remains a large, low-margin European retailer facing structural pressures that do not command a meaningful re-rating. He added that a decade ago the separation might have landed differently, but today the retail backdrop is far less forgiving. According to The Guardian - Business, Richard Chamberlain described the growth outlook for both sides of the business as challenging.
The separation will leave two FTSE 100 companies, both ultimately family-owned via charitable trusts, which underlines that this is more about structure than strategy.
The rationale for separation centers on distinct investor bases and operational focus. According to The Guardian - Business, Richard Chamberlain described the demerger as still making sense given the lack of synergy between the two parts of the business. According to The Independent - Main, Dan Coatsworth noted that the type of investor who wants to own shares in a food products business is not necessarily the same as one seeking retail exposure. Primark operates 486 stores in 19 countries, but how the demerger will affect its international expansion plans and funding is not yet known. In an official statement, George Weston said the demerger is an important step enabling greater understanding of the food business's differentiated portfolio and growth opportunities as a pure play FTSE 100 food producer.
Primark remains a large, low-margin European retailer facing structural pressures, particularly in Germany, and this is not the sort of growth story that commands a meaningful re-rating. A decade ago the separation might have landed differently, but today the retail backdrop is far less forgiving.
ABF has finally buckled and pressed the button on the demerger.
The type of investor who wants to own shares in a food products and ingredients business is not necessarily the same as one seeking exposure to the retail sector.
We would not be surprised if the group has begun to face additional trading and cost headwinds post the start of the Iran conflict, and the potential longer-term impact on petro-chemical prices around the world.
The demerger still makes sense given the lack of synergy between the two parts of the business.
We think the growth outlook for both sides of the business looks challenging.