Britvic puts Barr merger on ice

Irn-Bru maker Barr had been set to carry off an audacious reverse takeover of the larger firm until the watchdog intervened in February.

Britvic chairman Gerald Corbett said his company had changed since the tie-up was agreed last summer, and it now enjoyed “bright prospects” on its own.

Cumbernauld-based Barr must now table a fresh offer by the end of the month under takeover rules, and analysts said the terms would have to be renegotiated.

The commission gave the move a provisional thumbs up last month but it was already evident that the deal had lost its fizz in the eyes of Britvic’s new management.

After the official decision was released, Corbett further distanced Britvic’s management from the old deal.

He said: “Britvic is in a very different position to last summer when the merger was agreed. We have a new chief executive in Simon Litherland, who has done a fantastic job in implementing his new plan for Britvic. The board is confident of driving £30 million of cost savings over the next three years and of the enhanced international expansion opportunities.

“In addition, performance has improved, the merger benefits are materially less than they were and our share price is almost twice the level it was. Britvic’s prospects as a stand-alone company are bright.”

In its own statement Barr hailed the commission’s ruling as a “significant positive step” and said it would “actively reconsider a potential merger with Britvic”.

It added that, other than Britvic’s recently announced short-term cost saving plan, little has changed to alter its conviction that a merger represents “a unique opportunity for value creation for both sets of shareholders in the short, medium and long term”.

The original plan would have seen Britvic shareholders owning 63 per cent of the enlarged group, with Barr investors holding the remaining 37 per cent and the Scottish firm’s chief executive in charge.

Analyst Phil Carroll, at Shore capital, said there was still a case to be made for the merger but Barr shareholders would have to give some ground. He said the latest market valuations suggested a deal ratio of 67 to 33.

He said: “We believe a merger would deliver just over 10 per cent incremental shareholder value based on the synergy guidance given so far – this is despite Britvic utilising £15m of the £35m of cost synergies that were originally presented to the market.

“To our minds, a figure of over 10 per cent is just about enough to warrant a deal.”

But Wayne Brown, at Canaccord Genuity, said there was a danger that Britvic’s attempt to renegotiate terms in its favour could scupper a deal despite the need for consolidation in the sector.

He said: “We remain of the view that a merger is in the interest of both parties. This rationale is not purely based on cost savings, as some would let you believe, but has much more to do with global consolidation, long-term commodity cost pressures, a heightened UK competitive environment and lacklustre UK growth dynamics.”