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Primark can be separated and launched London There is a boom in the stock market City Following the announcement of a possible restructuring by its owner.
Associated British Foods (AB EatS) said it was reviewing the group’s structure which could result in Primark being separated from the food business.
The UK-listed company operates a grocery business, which includes the Kingsmill, Blue Dragon, Jordan, Twinings and Ryvita brands, as well as sugar, ingredients and agriculture divisions.
Its chief executive, George Weston, said the outcome of the review could mean the closure of Primark as a separately-listed entity in the UK.
“We will list Primark on the London Stock Exchange. Foods will be listed on the Stock Exchange,” he told the PA news agency.
A separate listing could boost London’s stock markets, which have suffered a lack of major flotation in recent years and a range of big companies are moving their primary listings to the US.
Mr Weston described it as a “demerger” and said: “Whittington will remain the majority shareholder of both companies; it now owns 58% of ABF, it will own 58% of each of the two vehicles.”
Whittington Investments is the investment vehicle for the Weston family and is the largest shareholder of AB Foods.
The Weston family was ranked in the top 10 of this year’s Sunday Times Rich List with a combined wealth of approximately £17.8 billion.
Mr Weston said the “size and complexity of Primark” meant it could benefit from having a separate leadership structure for the food business.
“I have believed for some time that the food company is not well understood and underappreciated and if we took it apart, it would give us an opportunity to explain it better,” he told PA.
“If the split goes ahead, I would hope to become chief executive of the food group.”
Dan Coatsworth, head of markets at AJ Bell, said: “It seems the board has now finally woken up to the fact that it could benefit from splitting into two, as the component parts attract different types of investors.
“The valuation of Primark as a standalone listed entity may be too high.
“AB Foods says it is considering all options but essentially that means the wheels are being greased for a corporate break-up.
“It’s very strong at the moment, with the likes of Unilever, Kraft Heinz and Warner Bros. Discovery in the process of demerging.”
Richard Hunter, head of markets at Interactive Investor, said the retail sector is “famously competitive, and Primark now stands out against Chinese players like Shein and Teemu, while its online offering still lags far behind Nextel”.
“Nonetheless, AB Foods anticipates that continued expansion of stores will drive further sales growth, and the group opened 23 new stores at home and abroad in the second half of the year,” he said.
In its financial results published on Tuesday, AB Foods reported an adjusted pre-tax profit of £1.7bn for the year to September 13, down 13% on the previous year.
Sales at Primark rose 1% year-on-year to £9.5bn, with strong trading in the second half of the year helping to offset a weak first half.
Mr Weston said there had been no price increases at Primark over the past year, except in the US where prices had increased by double digits “in the face of tariffs”.
He also stressed that the retailer is maintaining its focus on value and having “the best prices on the high street”, highlighting its sportswear range and its fundamentals.
However, the company said it expects Primark’s consumer environment to remain “dummy” in the coming year.
Meanwhile, the company said overall retail sales growth was hit by a 10% decline in sales at its China business.
Year-over-year sales were broadly flat for both the grocery and grocery divisions.