ABF demerger

At Tricio we focus on economic cycles, market structures and investor behaviour in order to help clients navigate markets with a medium to long-term investment outlook. We often use charts as a gauge of investor sentiment and behaviour.

In this blog we look at the demerger of Associated British Foods. In a nutshell, Primark is being hived off so that its management can focus on retail operations, with the sugar and food business (‘FoodCo’) operating on its own after the demerger. The company is aiming to settle everything by the end of 2027, giving investors plenty of time to mull over how they will vote on this plan and if they will hold on until they get their new shares.

We take a relatively agnostic view to this news. ABF has been useful gauge of UK PLC for some time as either a food staple (old British Sugar and many familiar brands) or retailer sentiment (Primark). The long-term chart of the share price below (weekly, semi-log with 13 and 50-week moving averages) shows a relatively lacklustre decade of underperformance relative to the FTSE 100 as the UK’s main index has forged new highs. The ABF share price has effectively mirrored post-EU referendum UK business sentiment – with the share peaking in late 2015.

A look at recent activity (chart below) shows that the news was not taken well initially (down over -6% at one point). The share is trading below the April 2025 Trump tariff low and may be set to press rising line support near 1550p. A turn below this demand line would suggest that sentiment is really taking a negative turn, if seen. Downside risk to the 1220p/1200p zone would be open, which if broken would shift the focus to 1000p and even lower. We don’t favour such a slide, but the company is betting on investors taking the view that by splitting the company into the retailer and food components, the focused management will change things for the better for both groups.

On paper this makes sense, but a case could be made for some investors liking the current setup which gives them a stake in consumer staples (food) and a stake in a price-conscious consumer discretionary brand (Primark, also a ‘fast-fashion’ play to some extent). A demerger could see some investors making the choice to stick with the food component as a pure play consumer staple holding. The retailer business would be judged vs. other companies in this sector. Primark has been strong for years in this sector, but investors could choose other brands to back if they view other brands and competitors being more attractive in this sector.

Bulls will need to see the rising support line holding up on any approaches to support. A recovery of the 50-week moving average (2,060p area) would be a sign of positive sentiment increasing, if seen. The falling resistance line is just below 2,600p and would mark a key barometer for any real surge in bullish sentiment if broken. 

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Gerry Celaya,

Chief Strategist