IRN-BRU owner AG Barr has approached rival Britvic over a possible £1.4 billion merger that could create one of Europe’s largest soft drinks companies.
Both companies stressed the talks were at an early stage and there was no certainty that a deal would take place, but they have already agreed a board structure, which would see AG Barr boss Roger White assume the role of chief executive of the combined group.
If the deal goes ahead, Britvic shareholders would own 63 per cent of the merged entity, with AG Barr’s investors holding the remaining 37 per cent.
Phil Carroll, an analyst at Shore Capital Stockbrokers, said: “I certainly think it’s a good deal for Britvic and the main reason for that is they’re getting Roger White, who I think is excellent.”
He said Britvic had “slipped up” over the recent recall of some Fruit Shoot drinks because of safety concerns over a new cap design, and its credibility in the City had been damaged as a result. The recall is expected to hit pre-tax profits at the group by up to £25 million.
Carroll said shareholders in AG Barr stood to benefit from holding a more liquid stock and “potentially a further chance down the line of being taken over by a bigger business”.
In a joint statement, the firms said the all-shares merger would create a group with a strong portfolio of market-leading brands. They added: “The combination would have compelling industrial logic and represents an opportunity for both companies to enhance their industry position, and achieve significant synergies and shareholder value.”
Shares in AG Barr rose 8.3 per cent, or 34.6p, to 450.2p yesterday, valuing it at £525.7m. Britvic soared 12.6 per cent, or 41.3p, to 369.9p, giving it a market capitalisation of £895.4m.
Cumbernauld-based AG Barr, which also owns the Rubicon, Strathmore and Tizer brands, employs about 1,000 people. The group said it was too early to say what impact the merger would have on staff numbers. Britvic’s workforce stands at around 3,500.
Britvic chairman Gerald Corbett would chair the board of the combined entity, while Ronnie Hanna, chairman of AG Barr, would become deputy chairman. John Gibney, chief financial officer at Britvic, would keep his position. There was no word on what role AG Barr finance director Alex Short would have after the tie-up.
The new board would also comprise six other non-executive directors – three nominated from each of Britvic and AG Barr. It is thought that Robin Barr, who remains as a non-executive after standing down as chairman of AG Barr in 2009, will keep his seat.
Barr, whose great-grandfather Robert Barr started the business in 1875, is one of just three people to know the formula of 32 ingredients in Irn-Bru. Launched as Iron Brew in 1901, the equivalent of 12 cans of “Scotland’s other national drink” are sold every second.
As well as its own brands such as Robinsons and Tango, Britvic makes Pepsi under licence in the UK, and Cannacord Genuity analyst Wayne Brown said it appeared that PepsiCo had agreed to the merger proposals.
Brown added: “In our view the AG Barr management team have a very strong track record and would add significant strength to Britvic from both an operational and financial performance perspective.”