£1.4bn Britvic-Barr tie-up put on ice?

There should be corks a-popping at Britvic and AG Barr after the Competition Commission cleared their merger. But Britvic has gone cool.

by Emma Haslett
Last Updated: 29 Mar 2016

It’s been nine months since drinks manufacturers Britvic and AG Barr announced their intention to form a £1.4bn merger – and the Competition Commission has finally given them the go-ahead. Trouble is, Britvic has suddenly gone (ice-) cold on the deal.

Under a provisional ruling issued this morning (the real thing comes in July), the Competition Commission says the proposed merger between the two firms will ‘not… result in a substantial lessening of competition and would not cause wholesale prices to increase significantly. The CC’s assessment, and the views of most retailers and other customers of the merging companies, suggested that the two brands were not close competitors.’ Quite right: Britvic’s Tango is no competition to Barr’s infinitely superior Orangina…

Nevertheless, with brands such as Irn-Bru, Pepsi, Robinson’s and Rubicon, the tie-up – to be known as Barr Britvic Soft Drinks – would form one of the largest drinks manufacturers in Europe, generating sales of more than £1.5bn a year. Crucially, when it was originally proposed, the merger was due to release £35m of cost savings between the two companies (part of which would come from about 500 job losses – about an eighth of the total workforce).

Nine months on, though, and Britvic seems to have changed its mind. Chairman Gerald Corbett says that although the company ‘welcomes’ the findings, Britvic is ‘in a different place to last summer when the terms of the merger were agreed’.

‘The cost savings from merging are less, we are performing better, we have new management and we have a new strategy to deliver good growth internationally as well as in the UK,’ he adds. ‘These are among the issues the board will reflect on in August once the CC’s conclusions are known in order to ensure that it acts in the best interests of Britvic’s shareholders.’

AG Barr is understandably annoyed: the FT quotes an insider saying that Britvic is ‘either playing hardball or they don’t want to do the deal’ – so there’s a good chance Britvic has realised it’s under-sold and it just wants a higher offer.

Weirdly, though, the market doesn’t seem affected: shares in both firms have remained relatively flat in early morning traders. Perhaps investors are just biding their time.

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