Primark to split from ABF with both firms set for separate FTSE 100 listings

The Weston family-controlled group expressing confidence in the prospects of both companies

FTSE-100 heavyweight Associated British Foods has unveiled plans to separate clothes retailer Primark, marking a significant strategic shift for the food and retail conglomerate. The market had broadly anticipated Associated British Foods (ABF) would hive off the retailer following an internal review as it grapples with fierce competition from high street competitors H&M and Zara.

The declaration ends months of conjecture over Primark’s future, and ABF said it anticipates both companies will trade separately on the blue-chip FTSE 100 index. ABF appointed Rothschild & Co last year to assist it in undertaking a “strategic” review to assess whether to divest the retailer.

The company said it was “confident” in the outlook of both operations. Primark runs 486 stores globally and generates approximately £9bn in annual revenue, as reported by City AM.

Associated British Foods is controlled by the Westons, the UK’s wealthiest family, whose holding company, Wittington Investments, maintains roughly 59 per cent of the firm.

Besides Primark, ABF owns tea brand Twinings, baked goods producer Kingsmill and subsidiary British Sugar. ABF, which has witnessed its share price decline so far this year, said it anticipates the demerger will cost around £75m.

The separation will take place through a dividend demerger, which will enable ABF to split off Primark by distributing shares in it to existing shareholders.

Primark sales grew in last year FoodCo, which will be the remaining entity of ABF once Primark is demerged, operates across 52 countries and generates approximately £9.8bn in annual revenue.

Primark currently runs 486 retail stores across 19 markets, with approximately £9.5bn of annual revenue and more than 83,000 employees.

International expansion has been a primary focus for the business, as it looks to grow its market share across Europe and the US.

Michael McLintock, who currently serves as chair of ABF, will remain in post until the spin-off is finalised in 2027.

George Weston, chief executive of ABF, will take the helm at FoodCo, while Primark’s current chief executive Eoin Tonge will continue to lead the clothes retailer.

Associated British Foods recorded a nine per cent decline in pre-tax profit across the group to £632m in the year to February, as revenue edged down two per cent to £9.5bn.

Primark posted like-for-like sales growth of 1.3 per cent in the UK, with the clothes retailer gaining market share over the period.

ABF said it expected Primark would be able to absorb costs arising from the Iran war, but noted it “remains alert to potential further deterioration in consumer spending”.

The company added that the impact of disruptions to energy and fertiliser supply chains resulting from the conflict is “unclear”.

ABF announced in August it would acquire Kingsmill’s bakery competitor Hovis for £75m, but this transaction has since been delayed by the competition watchdog amid concerns the diminished competition could push up prices for shoppers.

The British-Canadian Weston family, via Wittington Investments, also own department store Fortnum & Mason and homeware retailer Heal’s.

ABF was established by W. Garfield Weston in 1935 as Food Investments Limited, before listing on the London Stock Exchange in 1994.

ABF’s share price finished at 1,894p on Monday, leaving the stock down more than 10 per cent in the year to date.