San Francisco Frontiers - Associated British Foods to spin off Primark clothes brand

"A demerger of Primark is the best way to maximise long-term returns for shareholders, reflecting Primark's scale today and the need for a better understanding of the Food business," Michael McLintock, chair of ABF, said in a statement.

The demerger review was conducted in consultation with ABF's largest shareholder, Wittington Investments, which will maintain majority ownership in both companies.

Both entities are expected to be listed in London's top-tier FTSE 100 index.

Ireland-headquartered Primark, which operates across 19 markets and has more than 80,000 employees, accounts for roughly half of ABF's sales.

The rest of the business is focused on food, with ABF being a major producer of sugar and the owner of brands such as Twinings tea.

The spin-off is expected to be completed by the end of 2027, with shareholders retaining shares in both businesses.

"The bigger Primark has got, the stronger the call to let it stand on its own," said Dan Coatsworth, head of markets at AJ Bell.

"The type of investor who wants to own shares in a food products and ingredients business is not necessarily the same as one seeking exposure to the retail sector," he said.

ABF unveiled the spin-off as it reported a fall in both profit and revenue.

"We knew the first half of this financial year was going to be challenging and that's borne out in our financial results," ABF's chief executive George Weston.

But he said "Primark continued to make strong progress in re-energising its customer proposition in a difficult clothing market."

In November, ABF reported a full-year net profit drop of nearly 30 percent to £1 billion ($1.3 billion).

A.Clark--SFF