Britvic Casts Doubt on Reviving Barr Merger After Clearance

Britvic Plc cast doubt on resurrecting its proposed merger with A.G. Barr Plc after the U.K.’s main antitrust regulator provisionally cleared the combination of the soft-drink makers.

Britvic “is in a different place to last summer when the terms of the merger were agreed,” Chairman Gerald Corbett said in a statement. “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.” A company spokesperson declined to comment on whether the company would seek to adjust the terms of any potential deal.

Britvic, the Hemel Hempstead, England-based maker of Robinsons Barley Water, and A.G. Barr, maker of Irn-Bru, agreed to combine last November before scrapping plans three months later after the U.K. Office of Fair Trading referred the deal to the Competition Commission. The commission said today it didn’t see the deal resulting in a “substantial lessening” of competition or causing prices to increase significantly, as the two companies’ brands are not close competitors.

Britvic’s statement “raises the question of whether a deal will be concluded this time around,” Nicola Mallard, an analyst at Investec Plc in London, wrote today. While it’s possible the company’s statement could be an effort to reduce value of an offer, “we see the probability of both parties agreeing a deal as reduced.”

Cost Benefits

Britvic and A.G. Barr’s merger would have created a business with sales of about 1.5 billion pounds ($2.3 billion). Britvic shareholders stood to have owned 63 percent of the enlarged company, which 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, they said.

Britvic fell 1.3 percent to 494.2 pence at 12:22 p.m. in London trading, giving it a market value of 1.2 billion pounds. A.G. Barr rose 0.1 percent to 509.5 pence, valuing it at 594.9 million pounds.

Since scrapping the deal, Britvic has appointed a new CEO, Simon Litherland, and announced its own cost-cutting plans May 22, expected to result in savings of 30 million pounds a year from 2016. The news sent shares up the most in more than eight months and spurred investor speculation that the company may have given up on the merger.

’Positive Step’

A.G. Barr, based in Cumbernauld, Scotland, said today it welcomed the commission’s findings. The board “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,” it said, though no new merger can be formally announced until a final report is published.

Britvic said it would bear in mind the changes since the original deal was agreed when discussing the matter in August after the Competition Commission, an antitrust body, publishes its final conclusions.

The Competition Commission will publish provisional findings “shortly,” with the final ruling expected by July 30.

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