Primark spin off plan sees Associated British Foods weigh future of clothing chain and food empire

In a move closely watched by the City, Associated British Foods ABF has signalled the start of a long anticipated review into spinning off its jewel in the crown Primark. Top brass at the multinational food and retail conglomerate are now considering whether to separate its fast fashion behemoth from a portfolio that includes household names such as Kingsmill bread Twinings tea and British Sugar.

Unveiled on Tuesday the review follows years of debate about whether Primark truly belongs with ABF’s array of grocery and food businesses. Primark has grown from a single Dublin shop in 1969 into a global discount clothing powerhouse with more than 450 stores across the UK Europe USA and the Middle East contributing around half of ABF’s total sales. Despite its huge scale the retailer has sometimes seemed an uneasy fit among the group’s legacy food brands—a sentiment echoed by many market analysts. The City has often argued that separating Primark could unlock value and allow management to focus on delivering for clothing and food customers in different ways.

Chief executive George Weston has maintained there is real value in the group’s diversity pointing to the resilience shown during black swan events such as the pandemic when ABF’s food arm supported Primark during enforced store closures. Despite this a confidential review led with input from advisers at Rothschild Co and Wittington Investments has been initiated. Should a spin off proceed both Primark and the food group would be listed separately on the London Stock Exchange, with the Weston family remaining the majority shareholder in both entities thanks to their 59 per cent stake. George Weston has indicated his intention to lead the food business going forward.

Market watchers estimate that a stand alone Primark could see a market capitalisation of £13.4 billion compared to £18.5 billion for the whole group. Completion of the review is expected by April with any subsequent separation likely to take up to 18 months. During this period operations at both Primark and the food group are expected to continue as usual with no job losses or restructuring flagged by the company. Management is keen to stress that the proposal is an investigation not a break up, with the aim of creating two more agile and focused businesses for the long term.

Challenges persist across both divisions ABF’s sugar business has posted significant losses due to low European prices and rising costs while Primark faces stiff competition from rivals such as Shein and Temu, as well as sluggish consumer spending in several key European markets. The sudden resignation of Primark’s longtime chief executive Paul Marchant over allegations after a social event has also shaken investor confidence. ABF’s shares fell 3 per cent after the announcement reflecting market nerves about both group performance and the uncertainty around the spin off.

City commentators have broadly seen the review as a positive move albeit one that might have come a decade too late. There is a sense that while Primark was once the engine of ABF’s growth, retail now presents persistent challenges that separation may help both sides address. The outcome of the review will shape the direction of this historic British conglomerate for decades to come.