Associated British Foods (ABF) has announced that it has reached an agreement to acquire Hovis Group Ltd from its current owners, Endless LLP for an undisclosed sum.

The purchase is subject to regulatory review by the Competition and Markets Authority (CMA).

Hovis Group Ltd has said that the proposed acquisition marks a "significant step" towards creating a more sustainable and efficient bakery operation in the UK, and delivering "great products" for customers in a challenging market.

The company has also anticipated that approval from the CMA will take "some time".

Until regulatory clearance is granted, Hovis Group Ltd and Allied Bakeries will continue to operate as separate entities.

ABF has explained that it has been evaluating a range of strategic options for Allied Bakeries, its UK bakery business.

It outlined that profitability at Allied Bakeries has been increasingly challenged in recent years by a decline in demand for pre-sliced, packaged bread, and a loss of scale in Allied Bakeries' nationwide distribution network serving the major retailers with daily deliveries of bread and bakery goods.

ABF said that the acquisition of Hovis Group Ltd will combine the production and distribution activities of the two businesses, driving significant costs synergies and efficiencies, to create a profitable UK bread business that is sustainable over the long term.

It believes that the combined business will be better placed to compete effectively and to establish a stable platform for product innovation in the segments of the UK bakery category that are growing as a result of changing consumer tastes and needs.

This will include improvement in existing products and expansion into new product ranges.

Chief executive of ABF, George Weston said: "This transaction will create a UK bakeries business that is both profitable and sustainable over the long term.

"Supporting the Hovis and Kingsmill brands with well-invested and efficient operations will also enable innovation and growth. This solution will create value for shareholders, provide greater choice for consumers and increase efficiencies for customers," Weston added.