Comment: Barr-Britvic merger may have lost its fizz

Martin Flanagan
Martin Flanagan
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WHEN Irn-Bru maker AG Barr’s £1.4 billion merger with Britvic was referred to the Competition Commission in February the English group’s chairman Gerald Corbett blustered: “If this is industrial policy, I’m a Frenchman.”

But it doesn’t look like a case of toujours l’amour between the two soft drinks firms now after the CC provisionally judged the carbonated competition concerns of the Office of Fair Trading as overdone.

Shortly after the commission found there would be no substantial lessening of competition through the marriage of Cumbernauld-based Barr and Britvic (Robinsons, Tango, etc), Corbett made clear a revived transaction was far from a given.

He said Britvic, which issued a damaging slow-mo profits warning on a product recall last summer, was now in a “different place”.

It recently posted a sharp rebound in profits on better trading and a £30 million cost-cutting programme of its own, meaning the cost savings from a merger with the Scottish business would be well below the £35m touted at the time the proposed merger was unveiled last autumn.

Perhaps equally relevant, Britvic has a new chief executive in Simon Litherland, who replaced Paul Moody in February, the latter seen as damaged goods after the profits warning.

Under the merger terms, Roger White, the highly-regarded Barr chief executive, was to have taken the same role at Barr Britvic Soft Drinks.

But Litherland, who ran the much bigger Diageo’s UK business for 20 years, has hit the ground running. There must be doubts as to whether he would – or should – be willing to cede the top job at a merged entity to the arguably less internationally experienced White.

The two companies are barred, so to speak, from resuscitating the transaction until the CC’s full findings by end‑July.

But, given Britvic’s apparent new-found spring, one wonders if the plan, which would have created a European soft drinks giant better able to take on the likes of Coca-Cola, is dead in the water.

At minimum, Britvic shareholdeers would probably want more than the 63 per cent of the new entity they had under the initial terms, compared with 37 per cent for Barr’s investors.

But the waters are murkier than mere arithmetical tinkering. Britvic has got the fizz back in its glass, courtesy of the breathing space it ironically got through the OFT referral.

The muted reaction of both companies’ share prices to the CC green light suggests the City does not think it catastrophic for either if they decide to plough separate furrows. Barr’s bright, and Britvic’s getting better.

Corbett, a corporate veteran, might be trying brinkmanship to get the best outcome for his shareholders, but I suspect he is not bluffing, in which case it really may be a case of farewell, not just au revoir Barr.

Bowman is an old hand at the sell-off game

IS SMITHS Group, the engineering conglomerate, up for a big deal, either as a seller of some assets (the medical division is the speculative favourite) or the whole company?

The old chestnut has revived again, partly because chief executive Philip Bowman’s history inevitably suggests his affability is not mixed with sentimentality.

Bowman was ScottishPower’s boss before it was sold to Spain’s Iberdrola, and drinks giant Allied Domecq’s chief before it went to Pernod Ricard. Interesting.