AB Foods to split Primark from its food businesses

Associated British Foods has decided to separate its Primark fashion chain from its food businesses through a demerger following a review of the group's structure, it said on Tuesday.

AB Foods has said the financial markets will better value both the food businesses which include grocery brands such as Ovaltine, Ryvita and Twinings, and Primark, if the retail arm goes it alone.

Over the last three years, Primark, which trades from 486 stores in 19 countries, has faced intensifying competition from Chinese online giants Shein and Temu, while in January it warned profit would fall, partly due to discounting at the chain.

PRIMARK TRADES AT DISCOUNT TO PEERS

On completion of the demerger, AB Foods shareholders will hold shares in both listed entities, which are expected to be in the FTSE 100, AB Foods said in a statement.

Shares in the group have fallen 14 per cent over the last year, giving it a market capitalisation of 13.3 billion pounds ($18.0 billion).

Most analysts' sum of the parts valuations of AB Foods show Primark trades at a significant discount to peers, and analysts say Primark has the scale and growth opportunities to thrive as a standalone company.

The group launched a review of its structure last year, conducted in consultation with its largest shareholder Wittington Investments - the holding company for the Weston family.

The group expects to split before the end of 2027, with one-off separation costs of about 75 million pounds.

FIRST-HALF PROFIT FALL

AB Foods also reported an 18 per cent fall in first-half core profit and said its full-year profit would be below the previous year's 1.734 billion pounds, due to weak trading at Primark in continental Europe and weaker ingredient markets in the US.

For the 24 weeks to February 28, AB Foods made an adjusted operating profit of 691 million pounds, on revenue down 2 per cent to 9.47 billion pounds.