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Competition Commission provisionally approved merger between Cumbernauld's AG Barr and Britvic

Written by Scott Campbell.
Published at 15:12 GMT on Tuesday, June 11th, 2013.

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AG Barr is based in the Westfield area of Cumbernauld. Picture is courtesy of Bill Henry. 

CUMBERNAULD soft drinks manufacturer AG Barr now has the backing to pursue a merger with English rivals Britvic, after the Competition Commission provisionally backed a merger between the two soft drinks giants, today.

Both AG Barr and Britvic announced in November 2012 that it was their joint intension to merge, although the deal was put on hold earlier this year after the Office of Fair Trading said that a merger would raise competition concerns, with both companies appearing to have similar drinks.

However, earlier today, the Competition Commission said they were provisionally backing the merger of both companies, claiming that the brands were, in fact "not close competitors".

In an announcement to the stock exchange earlier today, AG Barr welcomed the announcement from the commission, claiming the Commission’s findings were a “positive step”.

The announcement said: "The board of AG Barr believes this is a significant positive step and in light of this will continue to work closely with the Competition Commission throughout the remainder of the inquiry with a view to reconsidering a merger (although pursuant to the Takeover Code no new merger may be formally announced until the Competition Commission has published its final report)."

However, following the announcement of the Commission’s provisional findings, Britvic delivered a possible hammer blow to any merger, claiming that the company would review the proposed merger in coming months, after the Competition Commission releases their final findings and rulings on the case next month.

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Commenting, Britvic's chairman Gerald Corbett said: "We welcome the Competition Commission's provisional findings and await their final conclusions by the end of July.

"In the meantime, as we enter our busiest time of the year, Britvic's management team, under our new chief executive, is focused on delivering its new strategy and continuing the trading momentum established in the first half of the year. This new plan, underpinned by £30m of cost savings, a proportion of which is to be invested in international growth, has now been communicated to our shareholders and has been well received.

"We are totally focused on the execution of this and delivering on the vision of a growing, international and increasingly profitable Britvic. Our company 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.

"These are among the issues the board will reflect on in August once the Competition Commission's conclusions are known in order to ensure that it acts in the best interests of Britvic's shareholders."

According to predictions released last year, both soft drink manufactures could expect to make annual savings of around £35m if the two firms tied the knot; in a move which would see Britvic shareholders hold approximately 63% of the new company, whilst AG Barr would hold the remaining 37% stake.

A merger between both firms would also see the total workforce of the combined operation reduced between 8%-12% of the total 4280 workforce, which would equate to between 342 to 513 posts.

Alasdair Smith, of the Competition Commission, said: "We have provisionally concluded that customers will not lose out from the merged Barr/Britvic. Given the size of this market and the number of consumers who could be potentially affected, it was important to examine the likely effects carefully.

"Carrying out a full investigation gave us the chance to look in detail at consumer preferences. These told us that most consumers tend to see Barr and Britvic brands as distinct products rather than as close substitutes for each other. Looking at consumer preferences and other evidence, we were able to conclude that the proposed merger was unlikely to substantially lessen competition."

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