ANALYSTS have raised fresh doubts over the planned £1.4 billion tie-up between Irn-Bru maker AG Barr and rival Britvic, despite the competition watchdog giving its blessing to the deal.
In its provisional report into the all-share merger, the Competition Commission said the two companies’ brands were not close competitors and the merger would not prevent smaller rivals from getting their products onto retailers’ shelves.
However, the planned deal lapsed in February because of delays caused by the Office of Fair Trading’s decision to refer the matter to the regulator, and Britvic signalled that it would drive a hard bargain if and when it resumes talks with Cumbernauld-based Barr.
Investec analyst Nicola Mallard said the broker had originally put the chances of a deal being agreed at 65 per cent, but this had been trimmed to 50 per cent in the wake of Britvic’s assertion that the maker of J2O, Robinsons and Tango was in a “different place” to late last summer, when the deal was first mooted.
She said: “We still expect the teams to resume discussions, but suspect the likelihood of a new deal has fallen in light of Britvic’s recent actions.”
The Hertfordshire-based firm last month unveiled plans to trim £30 million of costs by closing two manufacturing sites in Chelmsford and Huddersfield as part of a restructuring that will see the merger of its British and Irish business units. The shake-up will also lead to between 300 and 400 job cuts at Britvic, which employs about 3,300.
Britvic chairman Gerald Corbett said: “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.”
Cannacord Genuity analyst Wayne Brown said Corbett’s comments were “perplexing”, given that Britvic and AG Barr had issued a joint statement in February, in which both boards said they continued to believe a merger would benefit shareholders.
Barr, which has more than 1,000 employees, has produced Irn-Bru from a secret recipe for more than 130 years and last month said that total revenues grew 2.4 per cent in the 15 weeks to 12 May despite the coldest spring since 1962.
A spokesman for the firm, which also makes Orangina, Rubicon and Tizer, said yesterday’s provisional ruling was a “positive step” for the firm, although he pointed out that no new merger deal could be formally announced until the watchdog publishes its final report, expected by the end of next month.
The original plan would have seen Britvic shareholders owning 63 per cent of the enlarged group, to be called Barr Britvic Soft Drinks, with Barr investors holding the remaining 37 per cent.
Charles Pick, an analyst at Numis Securities, said: “We feel that Britvic may still be interested in a Barr Britvic Soft Drinks ‘mark 2’ – Barr certainly is – but only on the basis of improved terms. The extent could make or break any deal.”