Primark Demerger
Unlocking the Value Trapped Inside a Conglomerate
Please read disclaimer at bottom of writeup - this report is not investment advice
Introduction
Associated British Foods plc has spent the better part of six decades as one of Britain’s most unusual conglomerates. It is a business that, in the same annual report, discusses the sugar price in Europe, the performance of Twinings tea in Australia, and the like-for-like sales of a value fashion chain that operates 486 stores across 19 countries. That discrepancy has been an enduring source of valuation frustration for investors. The market has consistently struggled to price a group where roughly half of revenue comes from farming, processing sugar and manufacturing yeast, and the other half comes from one of the world’s largest physical clothing retailers. The result has been a persistent and deeply embedded conglomerate discount, with ABF’s blended enterprise value sitting at approximately 6x EV/EBITDA as of the time of writing, a multiple that fails to reflect the quality of either business in isolation.
On 21 April 2026, alongside its H1 2026 results, ABF's board announced it had reached a definitive decision to proceed with a demerger of its Retail business trading as Primark from its Food operations, to be known as FoodCo. The separation is to be effected by way of a dividend demerger, under which existing ABF shareholders will receive shares in Primark directly, without any cash consideration, retaining their existing holding in FoodCo simultaneously. Both entities are expected to list on the Equity Shares (Commercial Companies) category of the London Stock Exchange and, given their scale, are anticipated to be constituents of the FTSE 100 on admission. The timetable targets completion before the end of the 2027 calendar year, with a probable sweet spot between June and October of that year, as indicated by ABF's Chairman.
This report initiates coverage on Primark as a standalone investment case ahead of that listing. Primark is, by annualised revenue of approximately £9.5bn, the largest pure-play international apparel retailer that will exist on the London Stock Exchange. It operates a business model that is structurally differentiated from its peers: physical-only stores, no ecommerce fulfilment cost base, a lean central supply chain managed from Dublin, disciplined capital allocation, and a consistent track record of strong free cash flow generation across most market environments. It is also a business confronting genuine structural questions: the competitive pressure from Shein and Temu, the long absence from online retail, and the challenge of reigniting like-for-like sales in a weak European consumer environment. The investment case requires both to be held simultaneously.
We believe the demerger is the right structural decision, that Primark deserves a materially higher EV/EBITDA multiple as a standalone listed entity than it is currently afforded inside ABF, and that the valuation range implied by peer comparisons, approximately 10x to 13x EV/EBITDA represents a substantial re-rating from today's blended 6x. We are constructive on the long-term case and cautious on the near-term execution risk.
