British family Weston to list clothing chain Primark on the stock exchange
The conglomerate ABF (Associated British Foods), which also controls the famous Twinings tea, has announced a spin-off of the low-cost, £9 billion brand
Associated British Foods, the British giant listed on the FTSE 100, has confirmed its intention to spin off the Primark clothing chain, a brand famous throughout Europe, marking a dramatic change of direction for the conglomerate of the Weston family, Britain's richest.
The stock market reaction
The market did not like the announcement: BF shares lost over 6% on the London Stock Exchange, taking the stock down 16% since the beginning of the year. The move was not unexpected: Associated British Foods (ABF) was widely expected to spin off the retailer following an internal review, at a time when the company faces intense competition from rivals such as H&M and Zara.
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The announcement puts an end to months of speculation about Primark's future, and ABF said it expected both companies to be listed separately on the FTSE 100, the blue chip index.
Family capitalism
The company said it was 'confident' in the prospects of both businesses and chief executive George Weston said the move represents an 'important step in the evolution' of the group: the family's holding company, Wittington Investments, owns around59% of the company. In addition to Primark, ABF owns the tea brand Twinings, the bakery producer Kingsmill and the subsidiary British Sugar.
Group numbers
ABF said it expects a cost of around £75 million for the demerger. The demerger will take place through a stock distribution, which will allow ABF to demerge Primark by distributing the shares to existing shareholders. Primark's sales grew last year, to £9.5 billion. Primark currently operates 486 stores in 19 countries and over 83,000 employees. FoodCo, the division that will remain with ABF after the Primark demerger, operates in 52 countries and generates annual sales of around £9.8 billion.
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