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Britvic/Barr Destined to go Flat?

Robin Copland

Britvic Plc is a large company. It is a leading branded soft drinks business in the UK, sold 1.9bn litres of soft drink in the last year, and employs around 3500 people. Its brands include J20, Tango, Robinsons, as well as a collection of eponymous mixer drinks. Britvic Plc has a rival in A G Barr Plc, makers of Irn Bru, an iconic Scottish soft drink. Other rivals include Tizer and other well-known brands. A G Barr, with a turnover of £237m last year, is a major player in the soft drinks market.

There was talk of a merger between these two businesses late last year. A proposed all-share merger was announced in September, with plans to finalise the merger in November.  The conditions of the deal would have seen 63 per cent of the enlarged company going to Britvic's shareholders, while Barr's Roger White would become chief executive. The deal came to a standstill when the Office of Fair Trading referred it to the Competition Commission in February this year. It seemed the matter was closed until this month, when the Commission gave provisional approval for the deal.

In the mean time Britvic has appointed Simon Litherland as their new chief executive. Since he came on board in February 2013 Litherland has implemented a number of changes including the closure of two factories and expansion of the business into the emerging Indian market. This rationalisation plan, "reduced the synergies from a merger with Barr from £40 million to £25 million", according to Litherland and the Britvic board (The Times, 12 June 2013).

The result of these changes and their perceived impact is a change in the deal, such that should the merger take place Britvic would see Mr. Litherland take the top job and their shareholders would be given more stake in the merged company.

There are two possible negotiating tactics at play:

  • either the change in circumstance has resulted in Britvic structuring expectations away from the original deal.
  • or (and perhaps this may be more likely) the new conditions are set to put the merger "out of bounds" as they would not be acceptable for the other side.

A G Barr did issue a short statement of support for the Competition Commission's decision, though it is expected that the founding Barr family, which holds 30 per cent of the shares, would not concede to the new conditions - casting doubt on the prospect of a merger.

Watch this space.


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