Associated British Foods PLC (LSE:ABF) acquisition of Hovis is expected to weigh modestly on earnings in the 2027 financial year before becoming earnings accretive a year later, according to Citi.
The investment bank's comments followed completion of the deal after it received clearance from the Competition and Markets Authority.
ABF said the transaction would be "marginally dilutive" to group profits in the 2027 financial year as it invests in marketing and product development to integrate Hovis with its existing Allied Bakeries business.
Citi said that meant the acquisition was now likely to become earnings accretive from the 2028 financial year onwards, later than previously anticipated.
Both Hovis and Allied Bakeries are currently loss-making, with the group also expected to incur upfront restructuring costs during the integration.
Citi expects those costs to be treated as adjusting items in the 2026 and 2027 financial years, although the scale of the charges and the purchase price have yet to be disclosed.
The broker said it had previously estimated potential cost synergies could add between 1% and 4% to consensus adjusted operating profit forecasts for the 2027 financial year, based on comparisons with rival Warburtons. However, it now expects some downward pressure on 2027 earnings forecasts until more detail is provided.
Investors are likely to receive greater clarity when ABF reports annual results on 3 November.
