AB Foods to split Penneys off from its main food business 

Penneys, which trades as Primark outside of Ireland, has 486 stores in 19 markets and contributes over half of AB Foods' profit.

Associated British Foods has decided to separate its Penneys / Primark fashion chain from its food businesses through a demerger following a review of the group’s structure, the company said on Tuesday.

AB Foods said financial markets will better understand and value both its food businesses, which include brands such as Ovaltine, Ryvita and Twinings, and Primark if the fashion arm has a separate London listing, with its own board and investors.

Primark, founded in Dublin as Penneys in 1969, trades from 486 stores in 19 markets and has annual revenues of about 9.5 billion pounds ($12.8 billion). AB Foods' other businesses, which also include sugar, ingredients and agriculture divisions, operate across 52 countries with about 9.8 billion pounds of revenue.

While AB Foods says Primark now has the scale and growth opportunities to go it alone, it has faced growing competition from Chinese online giants Shein and Temu and in January warned on profit, highlighting weakness in continental Europe.

Shares in the group have fallen 14% over the last year, giving it a market capitalisation of £13.3bn (€15.24bn). Most analysts' sum of the parts valuations of AB Foods show Primark trades at a significant discount to peers.

The group launched a review of its structure last year with a view to maximising long-term value.

The review was conducted in consultation with AB Foods' largest shareholder Wittington Investments - the holding company for the Weston family - which is committed to maintaining majority ownership of both businesses.

AB Foods has said the financial markets will better understand and appreciate the food businesses if Primark was a standalone listed business, while Primark now has the scale and growth opportunities to go it alone.

Reuters