C&C grapples with apples and Oranges

Orange Capital, the United States activist shareholder, was surprisingly inactive yesterday when cidermaker C&C, in which it has an estimated 5 per cent stake, posted a difficult set of interim results. Activists normally like to make noise but by late last night Orange had studiously maintained its counsel.

Orange has loudly called on C&C to abandon its US foray and refocus on Ireland and Scotland at the expense of England and Wales, and return cash to shareholders. The activist presents a tricky challenge for C&C’s management.

If they engage too readily with Orange in the media, they run the risk of drawing more attention on to its demands. If they ignore Orange, they run the risk of tweaking the activist’s nose and provoking it into another major statement and maybe even attempt to rally other shareholders against management.A €100 million share buyback is a good way of C&C saying: “We hear you.”

It might rightly argue the buyback makes sense while its share price remains depressed, and that it doesn’t offload €100 million worth of capital just to send a 5 per cent shareholder a cryptic telegram.

C&C also made sure to indicate it remains committed to its international operations, however. Share buybacks will be maintained only as long as they make sense, said the company. And as soon as they don’t, and a suitable acquisition opportunity emerges, they’ll do that instead if they want to.

C&C is hoping the "endgame" of the wave of consolidation that has swept the brewing market throws it a few acquisition opportunities. AB Inbev and SABMiller are looking to get into bed together in a $106 billion combination, so that might result in a deal for C&C.

Similarly, it might become a takeover target itself. The strength of its balance sheet suggests otherwise, but everything in business has its price.