Britvic May Revive A.G. Barr Merger After U.K. Decision
The drinkmakers expect to demonstrate to antitrust overseers that the combination won’t lead to a “substantial” reduction in competition, the companies said in a second response to yesterday’s decision by the U.K. Office of Fair Trading to refer the proposed share-exchange transaction to the Competition Commission. A.G. Barr said yesterday that it was calling off the transaction because of the additional review.
“If clearance is received from the Competition Commission on terms satisfactory to both, A.G. Barr and Britvic,” the manufacturers’ boards “will each reconsider at that time the terms of a possible merger,” the companies said today in a joint statement.
Shares of Hemel Hempstead, England-based Britvic and Cumbernauld, Scotland-based A.G. Barr extended declines today on concern that reviving the deal may not be possible. The OFT said yesterday that a merger raised questions over a possible reduction in competition between A.G. Barr’s Irn-Bru and Orangina brands and Pepsi and Tango, which Britvic sells in the U.K. for PepsiCo Inc. The Competition Commission has six months to investigate.
“There remains a substantial appetite among both boards to complete this merger, and we are of the opinion that should the terms of the merger be renegotiated, Britvic are likely to be in a stronger position,” Damian McNeela, an analyst at Panmure Gordon, said in a note.
Britvic fell as much as 8.6 percent in London trading today, following yesterday’s 8.7 percent drop. The stock was trading down 8.3 percent at 385 pence at 12:02 p.m., reducing the company’s market value to 935 million pounds ($1.45 billion). A.G. Barr dropped 2.9 percent to 500.5 pence, extending yesterday’s 7.1 percent decline and cutting the drinkmaker’s market value to 584 million pounds.
The OFT’s decision “seems bewildering” given the “relatively small” share of the U.K. soft-drinks market held by the companies’ brands, McNeela wrote.
Britvic and A.G. Barr said in September that they were in talks. The combined companies had a market value of about 1.4 billion pounds at the time, and the business would have been one of the largest makers of soft drinks in Europe.
At the time of the announcement, Britvic was the second- largest supplier of soft drinks to the 7 billion-pound U.K. take-home market and the biggest supplier to the pubs and restaurant industry, worth about 2.7 billion pounds, according to data from Nielsen Scantrack.
A.G. Barr ranked fifth by volume in the take-home market, dominated by Coca-Cola Enterprises Inc.
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