Britvic-Barr merger ‘unlikely to be trumped by rival bidder’

By GARETH MACKIE
Published on 07/09/2012 00:00

ANALYSTS believe there is limited scope for a rival bidder to scupper the merger of soft drink groups AG Barr and Britvic, which are in talks over a possible £1.4 billion tie-up.

Shares in Barr, which makes Irn-Bru, Rubicon and Tizer, gained 7 per cent to 481.6p yesterday, having risen 8.3 per cent following the merger announcement on Wednesday, valuing the Cumbernauld-based group at £562 million.

However, Robinsons and Tango owner Britvic saw its shares decline 1.9 per cent to 363p, despite upgrades from a number of brokers.

If the deal goes ahead, Britvic shareholders would own 63 per cent of the merged entity, with AG Barr investors holding the remaining 37 per cent.

Drinks giant Diageo, whose portfolio includes Bell’s, Guinness and Johnnie Walker, has been touted as a possible bidder for Britvic. The company, which is thought be mulling a bid for tequila maker Jose Cuervo, did not comment yesterday. As well as its own stable of brands, Britvic makes Pepsi under licence in the UK, and PepsiCo has a director on the board.

Shore Capital Stockbrokers analyst Phil Carroll said: “We note there has been speculation regarding Diageo, but we believe it is more focused on Jose Cuervo at the moment. So with a PepsiCo director on the Britvic board, we assume that this potential deal has its blessing.”

Carroll said he believed Pepsico was a “likely stumbling block” to a private equity bidder becoming involved, so the number of potential suitors would be limited as the US group was likely to prefer a more strategic partner. He added: “However, if there are any interested parties, then Barr’s move may now flush out a counter offer.”