IRN-BRU maker AG Barr’s proposed £1.4 billion merger with rival Britvic is expected to get the go-ahead from the competition regulator this week.
However, analysts say that the delay since the merger was referred by the Office of Fair Trading in February should favour Britvic in any renegotiation of terms.
Charles Pick, drinks analyst with Numis Securities, said: “I think the odds are very short that the deal will be cleared. I feel the anti-competitive basis on which it was referred to the CC [Competition Commission] was flawed.
“The soft drinks sector would still be competitive after this merger. Seventy per cent of the Scottish soft drinks market is sold under promotion anyway.
“But Britvic has strengthened its hand since the original terms of the deal were unveiled last autumn.
“It has a new chief executive [Simon Litherland, who replaced former boss Paul Moody in February], and announced a big cost-cutting programme of its own.”
Unveiling a 50 per cent jump in interim profits to £37.5 million last month, Litherland unveiled a £30m cost-cutting programme, which included the closure of two production sites in Huddersfield and Chelmsford.
Another analyst said: “About £15m of Britvic’s cost-saving plan will overlap with the £35m of cost savings the two parties said would come from the merger, so valuations get trickier.
“But Britvic is now able to say it can achieve a lot under its own steam even though it still favours the merger.
“I expect the CC will approve the deal, with the final decision due in July. But when the merger was initially announced Barr shareholders were getting 37 per cent of the new Barr Britvic Soft Drinks, with Britvic investors getting 63 per cent.
“The market capitalisations of the two companies now suggest Barr investors holding a lower 32.5 per cent of any new entity and Britvic shareholders getting 67.5 per cent.”