Fizz goes out of soft drinks merger

Britvic and AG Barr, the UK-based soft drinks companies, have vowed to press on with plans to join forces after Britain’s top antitrust watchdog, the competition commission, began a six-month inquiry into the proposed £1.4 billion deal.

Investors, however, were less convinced that a deal – seen by some analysts as an elegant means of turning round Britvic’s fortunes – was still on the cards. Shares in Britvic, maker of Robinsons squashes, closed down 7.1 per cent at 390p yesterday, while AG Barr, the maker of Irn-Bru, was off 2.5 per cent at 502.5p.

“The biggest danger is that AG Barr turns away, now [that] Ribena and Lucozade are on the table,” said Jamie Isenwater, analyst at Deutsche Bank. “That would be a deal that delivers the same scale benefits without the legacy issues of Britvic. That’s got to be an option.”

GlaxoSmithKline said earlier this month it was considering a sale of the Ribena and Lucozade drinks brands from its pharmaceutical and consumer portfolio.

AG Barr and Britvic had long eyed a merger, according to people familiar with their plans, but talks only took off in earnest in September when AG Barr approached its bigger rival. Britvic at the time was reeling after a costly recall of its Fruit Shoot drinks and a wet summer that left the share price at near three-year lows.

Terms for the all-share deal, under which AG Barr chief executive Roger White was to take the top job, were put to shareholders in November, but deliberations by the Office of Fair Trading resulted in the deal ploughing through two deadlines under the takeover code.

Following Wednesday’s move by the competition commission to launch a probe, that deal has now lapsed.

Yesterday the two groups said they would work with the watchdog to clear the deal, potentially opening the door to divestments, although this is seen as unlikely. – (Copyright The Financial Times Limited 2013)