THE City expects Irn-Bru maker AG Barr to pursue other acquisitions after Japanese drinks giant Suntory yesterday scooped up the Lucozade and Ribena brands for £1.35 billion.
The Cumbernauld-based firm had not publicly stated that it was interested in buying the brands from GlaxoSmithKline (GSK), Britain’s biggest drugs maker, but The Scotsman has learned that it did speak to the group.
AG Barr’s reverse takeover of Pepsi-bottler Britvic collapsed in July, despite receiving the Competition Commission’s go-ahead after a lengthy inquiry.
Wayne Brown, an analyst at Canaccord Genuity, expects AG Barr to now look for other potential targets.
“They will probably cast their net out there, but paying a sensible multiple for an acquisition would be their main priority,” Brown said.
He pointed out that AG Barr’s newly opened manufacturing facility at Milton Keynes gave the company the capacity to grow organically as well as through mergers and acquisitions.
Brown added: “They have the capacity to bulk up their business with other brands and utilise their new manufacturing facility more effectively. They’re an ambitious team.”
He highlighted the firm’s cash returns on its assets, which had risen to 20 per cent from 7.8 per cent, greater than Coca-Cola’s 17.3 per cent.
Phil Carroll, an analyst at Shore Capital, agreed that AG Barr would look at other takeover opportunities. He said: “Acquisitions are always on their mind – but it all depends on the opportunities at any given point in time.
“Acquisitions are [not] totally off the agenda, but I think management time will be focused on organic developments.”
Lucozade and Ribena brought in £500 million of revenues last year, meaning Suntory – which bought Glasgow-based Morrison Bowmore Distillers in 1994 – will pay a multiple of about 2.7 times sales, at the higher end of recent soft drinks deals.
Under yesterday’s deal, Suntory will buy both the brands and GSK’s factory at Coleford, in the Forest of Dean. The “vast majority” of the 500 staff at the plant will transfer to Suntory.
GSK will retain a licence to produce and sell the drinks in Nigeria. About 75 per cent of Lucozade and Ribena’s sales come from the UK.
David Redfern, GSK’s chief strategy officer, said: “Lucozade and Ribena are iconic brands that have made a huge contribution to GSK over the years, but now is the right time to sell them as we increase the focus of our consumer healthcare business and execute the
delivery of our late stage pipeline of pharmaceuticals and vaccines.”
Lucozade, launched in 1927, and Ribena – which first went on sale in 1938 – were owned by Beecham, which merged with SmithKline Beckman in 1989 before a further merger with Glaxo Wellcome in 2000 to form GSK.
Suntory, best known for its Yamazaki Japanese whisky, bought the Orangina Schweppes drinks brand for more than $3bn (£1.9bn) in 2009, giving it access to markets such as France and Spain.
The group had been touted as the frontrunner to buy the labels from GSK since they were put up for sale in April, with Suntory raising $4bn in June from a partial stock market listing of a division containing many of its food and drink businesses.
The flotation stoked rumours of a bid for Beam, which makes whiskies including Ardmore, Laphroaig and Teacher’s.