Investors look to Barr for Britvic merger clues

Both companies have vowed to press on with the merger after the £1.4 billion deal lapsed following last month’s decision to refer the deal to the Competition Commission.

In a joint statement, Irn-Bru maker Barr and Britvic – the home of Robinsons squashes – said they would work closely with competition authorities to expedite a “compelling rationale for clearance”.

Analysts at Panmure Gordon expect attention to shift to Milton Keynes when Barr presents year-end results on Thursday.

The Scottish group is building a £41 million warehouse and production facility on the edge of the Buckinghamshire town to advance its southern expansion and take pressure off canning facilities at its headquarters in Cumbernauld.

It has been suggested that the Britvic deal could accelerate plans at Milton Keynes, which is expected to become operational this summer.

With less than five weeks gone in what will likely be a six-month review by competition authorities, such predictions will be the only clues as to how the tie-up with Britvic is progressing.

“It will be the white elephant in the room,” observed one analyst. “Everybody knows it is there, but nobody will have any answers.”

Barr refused to comment last week on whether it might be interested in a tilt at the Ribena and Lucozade brands that drugs giant GlaxoSmith-Kline (GSK) is considering selling in an auction predicted to fetch up to £1bn.

Such a move could potentially derail the proposed marriage of Barr and Britvic, particularly if the review by the Competition Commission turns onerous.

However, GSK isn’t expected to make a final decision on the fate of Ribena and Lucozade until this summer.

This could create a window of opportunity for a bid for the GSK brands by a Barr-Britvic combine if the merger of the latter two is eventually cleared.

On a standalone basis, analyst Phil Carroll of Shore Capital believes that Britvic’s debt pile would put it out of the running for the GSK drink brands, which have reportedly attracted interest from major private equity houses.

“AG Barr might be interested, but I don’t think Britvic would be able to do it without raising substantial additional funds, and that would be difficult for them at this time,” Carroll said.

Following a year of poor weather and rising costs, pre-tax profits at Barr are expected to remain flat at £34.1m on sales up 7 per cent to £253m.

Britvic is holding its annual general meeting on Tuesday.

Barr approached Britvic about a possible merger in the wake of last year’s Fruit Shoot recall, which at last count had cost Britvic nearly £17m.

The original terms for the agreed deal were put to shareholders in November, but those will have to be renegotiated if the merger gets the go-ahead.