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Cumbernauld may not lose AG Barr as Britvic merger looks to be Tango'd

Written by Scott Campbell.
Published at 23:19 GMT on Thursday, May 23rd, 2013.

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Picture is copyright of Bill Henry and is used on his courtesy.

CUMBERNAULD may not lose AG Barr to a merger with rivals Britvic, with selected market analysts predicting the chances of merger between the two soft drinks manufacturers to be under 10%.

The Competition Commission put the merger plans on pause, in February, and is expected to decide this summer whether Britvic, whose brands include Robinsons, Tango and Fruit Shoot,  and AG Barr could merge to create one of Europe's biggest drinks firms.

However, some market analysts have put the chances of a merger at less than 10%, according to the Herald, with Gerald Corbett, chairman of Hemel Hempstead-based Britvic, saying: "The Competition Commission is expected to announce its final decision by the end of July.

"The board will then decide, in light of the Competition Commission's decision, whether a transaction on the right terms with appropriate management and governance arrangements, can be consummated in the interests of shareholders.

"In the meantime, as we approach our busiest time of year, the management team, under our new chief executive, is totally focused on executing its new strategy."

The renewed doubts over the merger of the two companies comes after Britvic's new chief executive Simon Litherland - who was put in his position in February -yesterday revealed plans to make £30 million of annual cost savings by 2016, including more than 300 job losses. The news follows a pre-tax profit increase, posted by Britvic – equating to a 51.2% rise for the 28 weeks to April 14.

The encouraging figures meant that Britvic's shares closed up 50.3p or 10.7% at 522.5p.

Under the merger plans, it was promised that £40m worth of savings would be achieved through Britvic’s corporate marriage with AG Barr – meaning that the merger is now less attractive, due to higher profits and a new strategy to cut costs.

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Also included in the merger proposals was an agreement that an all-share deal – announced in November – would have handed Britvic shareholders 63% of the company, with the Barr-Britvic firm basing its operational headquarters located in Hertfordshire. Additionally, AG Barr chief executive Roger White would have run the combined company with the new co.’s formal headquarters in Cumbernauld. 

An AG Barr spokesman said: "As expected, Britvic has delivered an improved performance which reflects the forecast recovery trajectory following the difficulties that they experienced last year.

"AG Barr remains positive regarding the future prospects and the compelling rationale of a Combined Barr-Britvic business delivered by the best of both management."

The merger was paused, in February, however after the Competition Commission stepped it – meaning that, If talks do restart in August ,then Britvic is likely to pursue a more conventional takeover of its smaller rival, with Britvic's attention now focused on United States and Indian market expansion, according to the Herald

Ending the merger could, however, save jobs – with a proposed merger likely to have seen 500 positions slashed as a result of the corporate tie-up.

According to the Herald, Ian Shackleton, analyst at Nomura wrote in a note for clients: "Although both Barr and Britvic have indicated that they would be interested in pursuing the proposed merger if the Competition Commission permits in July, we now see the likelihood here as small (under 10%) as Britvic appears to be capturing some of the perceived benefits by itself."

Matthew Webb, analyst at JPMorgan said that Britvic's announcement "serves as a 'declaration of independence". However, Wayne Brown at Cannacord Genuity said Britvic "remains a volatile company and lacks the track record of delivering sustainable earnings growth".

He added: "The Britvic board was supportive of the merger and, with the market backdrop increasingly challenging, we would be surprised if this view has changed."

AG Barr shares closed up 14p or 2.4% at 588.5p.

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