The UK competition watchdog has ramped up its investigation into a £75m takeover deal that will result in the owner of Kingsmill snapping up its sliced bread rival Hovis.

Associated British Foods (ABF), which also owns the Primark clothing chain, confirmed plans to buy Hovis from private equity owners Endless in August, combining the UK’s second- and third-largest bread brands.

However, the Competition and Markets Authority (CMA) has now launched an in-depth investigation into whether the deal could harm consumers, potentially leading to reduced choice and higher prices on grocery shelves.

The news came as ABF issued a profit warning, saying that it expected adjusted operating profit for the wider group to “be below last year”, sending the group’s shares down by as much as 11% on Thursday morning.

The CMA, which initially raised concerns in December, said on Thursday it was launching its “phase 2” investigation to confirm whether the takeover would result in a “substantial lessening of competition” for mass-produced baked goods.

The regulator will ultimately have to decide whether the brands face sufficient rivalry on price and quality from supermarkets’ own labels and other options, as well as the UK’s market leader, Warburtons, which accounts for more than a quarter of packaged sliced bread sales

August’s takeover announcement came amid a drop in popularity of mass-produced sliced bread and baked goods, as customers spurn ultra-processed foods and turn to more artisanal loafs.

The CMA’s investigation is due to run until at least the end of June, slowing the pace of the bread merger. However, Hovis directors said in accounts published this summer that they thought any deal was “unlikely to be concluded” before September 2026, and that reviews were likely continue until at least then.

ABF noted in a trading update on Thursday that “weak” consumer confidence in the UK and Europe had weighed on sales, particularly at Primark, which were lower-than-expected over the past four months. While Primark gained market share, ABF said it expected sales growth at the clothing brand to be in the “low single digits” in the first half of the year.

Chief executive George Weston said: “In a challenging consumer environment, our focus is on factors within our control, including initiatives now under way in Europe aimed at improving performance … While we expect the tough trading conditions to continue in the short term, we remain confident in the overall prospects for the group.”