AG Barr and Britvic look to allay merger fears

AG Barr and Britvic yesterday pledged to keep their merger plans alive by convincing watchdogs that the deal will not have a major impact on competition in the soft drinks sector.

The tie-up to create one of Europe’s biggest drinks firms was referred by the Office of Fair Trading to the Competition Commission on Wednesday after it raised competition concerns over certain brands.

But the two companies stressed that they believed that the merger “will not result in a substantial lessening of competition and that they will be able to demonstrate this to the Commission”.

The OFT’s referral centres on its concerns around a loss of competition between brands such as Britvic’s Pepsi and Tango and Barr’s Irn-Bru and Orangina. But analysts said they believed this hurdle could be overcome.

“The competition concerns could be dealt with through the termination of licensing Orangina in the UK, and the sale of smaller non-core brands,” Canaccord Genuity analyst Wayne Brown pointed out.

“Orangina accounts for around £5m to £10m of sales for Barr, hardly a competitive stumbling block in a soft drinks market worth £9 billion.”

The Commission’s investigation is expected to take six months. The companies said that, if clearance was obtained, they would reconsider the terms of the merger at that time. Shares in Barr fell by 13p to 502.5p while Britvic closed down 30p at 390p.