Barr and Britvic poised to tie knot in £1.4bn deal

By MARTIN FLANAGAN
Published on 28/10/2012 00:00

IRN-Bru maker AG Barr and the bigger soft drinks group Britvic are poised for an announcement this week that they have successfully struck a £1.4 billion merger deal after lengthy talks.

The Scottish group and Britvic, which bottles Pepsi in the UK, revealed on 5 September they were in preliminary talks about a merger that many have deemed a “reverse takeover” by Barr.

The City expected early confirmation of a deal because the original announcement confirmed that the groups had already earmarked top jobs in any new entity and the precise share splits between Barr and Britvic shareholders.

But earlier this month, at the parties’ request, the City’s Takeover Panel extended the deadline for a firm merger proposal from 3 October to this Wednesday, 31 October.

Drinks analysts believe this deadline will be met. One commented: “In racing terms, I believe it is 6-4 on that a firm deal will be unveiled this week and 5-1 against that it is a ‘walk-away’. Another extension would, I think, raise City eyebrows given that Britvic has an end-September financial year-end and its provisional profit and loss account for 2011/12 should have been available to AG Barr by now – probably for several weeks.”

Another analyst, Phil Carroll, at broker Shore Capital, said: “It would create a level of scepticism [about the proposed deal] if a further deadline extension was announced.”

However, Carroll said he believed the delays were more due to Barr’s reputation for “conservatism” and a determination not to “rush things” on due diligence rather than any major obstacles to a consummated merger.

He also said Britvic might be wary of announcing an agreed proposal hastily because of its badly received profits warning last summer.

The company’s credibility was seen as damaged after it first told the market that a recall of some Fruit Shoot drinks because of safety concerns would cost only up to £5m. This was revised within a fortnight to at least £18m.