IRN-BRU manufacturer AG Barr and rival Britvic unveiled their £1.4 billion merger proposal yesterday to create one of Europe’s biggest soft drinks businesses in a deal that will see up to 500 jobs shed.
The tie-up will see investors in Cumbernauld‑based Barr, which also owns Rubicon and Tizer, own 37 per cent of the new entity, to be called Barr Britvic Soft Drinks. Shareholders in Britvic, whose products include J20 and Tango, will own 63 per cent of the enlarged group, a split in line with the stock market valuations of the two groups.
Today’s announcement to create a soft drinks major with annual sales of £1.5bn hailed the “compelling commercial and industrial logic” of the deal.
The companies said they believed they could shake £35 million of cost-saving synergies from the transaction in reduced overheads, procurement and supply chain efficiencies.
On the impact of job losses, predicted in Scotland on Sunday in September, they said: “The directors of AG Barr and Britvic believe the net reduction in combined group headcount is likely to be in the range of 8 to 12 per cent.
“The number of employees and locations affected will depend on the outcome of the integration planning and these changes will only come into effect as synergies are realised over the three years post completion.”
Roger White, chief executive of Barr, who will take the same position in Barr Britvic Soft Drinks, would give no further details on the split of cost synergies or which jobs were under threat.
White said: “There will be 350 to 500 [job cuts] over a three-year horizon. We cannot say anything more specific [on various synergy issues] because we are reviewing, validating and updating multiple plans.” The groups’ combined headcount is currently about 4,000.
In addition, the companies said they expected to achieve revenue synergies of at least £5m from combined distribution channels, brand portfolios and greater geographic presence in the UK.
Paul Moody, Britvic’s chief executive, who will leave the group towards the middle of 2013, said: “There is strong complementarity. AG Barr is strong in convenience stores, Britvic in groceries, pubs and clubs. Barr is stronger above the M62 [the trans-Pennines motorway], Britvic under the M62.”
Wayne Brown, drinks analyst at Cannacord, said: “The synergy assumptions are conservative and more than achievable. They could end up being materially higher.”
The legal headquarters of the enlarged business will be Cumbernauld, while the operational HQ will be Britvic’s main centre in Hemel Hempstead, Hertfordshire.
The chairman will be Gerald Corbett, currently chairman of Britvic, which also has a licensing agreement in the UK with Pepsi, who support the deal. John Gibney, the current chief financial officer of Britvic, will have the same role in the combined group. Ronald Hanna, the chairman of Barr, will become
deputy chairman of Barr Britvic Soft Drinks.
Hanna said the transaction, which needs the approval of shareholders, was a “unique opportunity” to create long-term value for both sets of shareholders.
The merger ratio is 0.816 new Barr shares for every Britvic share held.