AG Barr-Britvic merger falls through at last minute

11th Jul 2013 15:16

After months of waiting for the Competition Commission (CC) to grant the all-clear to the proposed merger between soft-drinks groups AG Barr and Britvic, the deal has now fallen through with Britvic rejecting an improved offer from AG Barr at the last minute.AG Barr has now announced its intention to walk away from the potential tie-up, which would have created a multibillion-pound major player in the industry with a combined portfolio of brands including Robinsons, Fruit Shoot and J2O (Britvic) as well as IRN-BRU, Orangina and Rubicon (AG Barr).On Tuesday, the CC said it had finally cleared the merger, deciding that a combination of the two companies would not result in a substantial lessening of competition in the soft-drinks sector.However, in line with comments made last month, Britvic's Chairman Gerald Corbett reiterated that his firm is now in a "very different position" to last summer when the merger was first announced, saying that the estimated merger benefits were now less than expected and its share price has nearly doubled.The move was another not-so-subtle hint that Britvic would want an improved offer from AG Barr for the merger to go ahead. As such, in a statement on Thursday AG Barr said that it had made a revised proposal to Britvic's board on more favourable terms than the previous approved offer in January. However, the group announced: "The board of Britvic has rejected this proposal. As a result AG Barr confirms that it does not intend to make an offer for Britvic."AG Barr Chairman Ronnie Hanna said that he was "disappointed that the opportunity to create significant value for both sets of shareholders has been rejected". Nevertheless, he reassured investors that the board is confident of its position as a stand-alone entity: "AG Barr continues to outperform the UK soft drinks market and will follow its successful long term strategy supported by a strong balance sheet, unique brands and a well invested asset base."In line with the City Code on Takeovers and Mergers, AG Barr still has the right to launch another offer for Britvic within six months.In a research report on Tuesday, analyst Wayne Brown from Canaccord Genuity questioned Corbett's comments about how the business has actually changed since the start of the year. He said that it represents a total reversal of the board's view and "comes at a time when the underlying performance of Britvic has worsened and the competitive landscape in the UK has intensified".BC