Britvic Plc (BVIC) reiterated that combining with A.G. Barr Plc is unlikely, even as the potential partner said it would “actively” look at reviving a deal after a U.K. regulator cleared the soft-drink makers’ abandoned merger plan.
Britvic’s “performance has improved, the merger benefits are materially less than they were, and our share price is almost twice the level it was,” Chairman Gerald Corbett said today in a statement. “Britvic’s prospects as a stand-alone company are bright.”
Britvic, the Hemel Hempstead, England-based maker of Robinsons Barley Water, and Irn-Bru producer A.G. Barr agreed to merge last November. The transaction was scrapped after the U.K. Office of Fair Trading referred it to the Competition Commission on concerns it might lead to price increases. The commission, following preliminary clearance on June 11, approved the merger today, saying it wouldn’t hurt competition.
“There are enough synergies left to warrant a deal but clearly the terms are going to have to change to get it to go ahead, with the ownership levels likely to be the main point of change,” Phil Carroll, an analyst at Shore Capital in London, wrote today. “If pushed, we ultimately believe a deal will be agreed but clearly there is a significant chance that it may also not happen,” he said, saying Britvic would be the “company with more to gain to get the deal to happen.”
‘Positive Step’
A.G. Barr, based in Cumbernauld, Scotland, said today in a statement that the commission’s announcement was a “positive step” and will “actively reconsider” a deal.
Britvic rose as much as 0.8 percent to 524.5 pence and was trading up 0.5 percent at 8:44 a.m. in London, valuing the company at 1.28 billion pounds ($1.91 billion). A.G. Barr fell as much as 2.2 percent to 520 pence for a market value of 607.2 million pounds.
A.G. Barr’s board “will review all material new developments since the original merger terms were agreed but currently believes that, other than Britvic’s recently announced short-term cost saving plan, little has changed,” the company said. The merger poses “a unique opportunity for value creation for both sets of shareholders in the short, medium and long term.”
A.G. Barr must announce a firm intention to make an offer for Britvic by 5 p.m. in London on July 30, the U.K. takeover panel said today.
Savings Target
Since scrapping the merger, Britvic has appointed a new CEO, Simon Litherland, and it announced cost-cutting plans May 22 targeted at savings of 30 million pounds ($44.9 million) a year starting in 2016. The reorganization proposal sent Britvic’s shares up the most in more than eight months and spurred investor speculation that the company may have given up on the A.G. Barr transaction.
Combining Britvic and A.G. Barr would create a business with sales of about 1.5 billion pounds.
Under the original proposal, Britvic shareholders would have owned 63 percent of the combined company. The merged drinkmaker would have been led by A.G. Barr Chief Executive Officer Roger White, with John Gibney, Britvic’s chief financial officer, retaining the role at the merged group. The combination would have created cost and revenue benefits of 40 million pounds a year by 2016, the companies estimated.
