According to Financial Times News, Associated British Foods is exploring a potential spin-off of both its Primark fashion chain and its food business. The UK-listed conglomerate announced this strategic review on Tuesday, working in consultation with its largest shareholder Wittington Investments. Interestingly, ABF emphasized it’s committed to maintaining majority ownership of both businesses regardless of the outcome. This comes after the company’s shares have dramatically outperformed the market, rising more than 70% over five years compared to the FTSE 100’s 35% gain.
Sponsored content — provided for informational and promotional purposes.
Why This Makes Sense Now
Here’s the thing about conglomerates – they often trade at what’s called a “conglomerate discount.” Basically, investors struggle to value diverse businesses under one roof. Primark is this massive fast-fashion retailer with its own growth dynamics, while ABF’s food business includes everything from sugar to ingredients. They’re completely different animals.
And look at that stock performance – up 70% when the broader index only managed 35%. That’s impressive, but it might be masking even greater value. If you separate these businesses, investors could more accurately price each one. The food operations might appeal to dividend-seeking investors, while Primark could attract growth-focused money. It’s like having two different investment stories instead of one confusing narrative.
But There’s a Catch
So why maintain majority ownership? That’s the billion-dollar question. If they’re going through all this trouble, why not do a full separation? Well, conglomerates provide financial stability. When one business hits a rough patch, the other can provide support. Primark had some tough years during COVID when stores closed, while the food business kept humming along.
There’s also the Weston family factor through Wittington Investments. They’ve controlled this company for generations and probably want to keep strategic control. A full spin-off would mean losing that integrated structure they’ve built over decades. And let’s be real – breaking up a company this size is incredibly complex. You’re talking about separating supply chains, corporate functions, debt structures… it’s a massive undertaking.
What’s fascinating is the timing. Retail is facing headwinds with consumer spending under pressure, yet ABF is considering this now. Maybe they see something we don’t – or maybe they’re preparing for a future where each business needs to stand on its own. Either way, this could be one of the biggest corporate restructurings we’ve seen in UK retail lately.
