Competition Commission provisionally approves AG Barr-Britvic merger

11th Jun 2013 08:00

The Competition Commission (CC) has provisionally cleared the tie-up between FTSE 250 soft-drinks giants AG Barr and Britvic, saying that the combined company would not be detrimental to competition and would not cause a big hike in wholesale prices.However, comments from the Chairman of Britvic on Tuesday raised concerns that the groups would have to renegotiate on terms once the competition watchdog gives its final report on July 30th.The all-share merger, which is expected to create one of Europe's biggest soft-drink firms with annual sales of over £1.5bn, was first announced in November but put to the CC for investigation in February. In a statement on Tuesday, the CC said that the brands of AG Barr (including IRN-BRU, Orangina and Rubicon) and Britvic (Robinsons, Fruit Shoot and J2O) were not close competitors. Furthermore, the report found that the new entity should not disadvantage smaller companies or new entrants in the market."We have provisionally concluded that customers will not lose out from the merged Barr/Britvic. Given the size of this market and the number of consumers who could be potentially affected, it was important to examine the likely effects carefully," said Alasdair Smith, CC Deputy Chairman."Carrying out a full investigation gave us the chance to look in detail at consumer preferences. These told us that most consumers tend to see Barr and Britvic brands as distinct products rather than as close substitutes for each other. Looking at consumer preferences and other evidence, we were able to conclude that the proposed merger was unlikely to substantially lessen competition."Mixed messages from Britvic"We welcome the Competition Commission's provisional findings and await their final conclusions by the end of July," said Britvic's Chairman Gerald Corbett.However, Corbett warned that Britvic is in a "different place" to last summer when the company first agreed to a merger.Since then, the firm has unveiled plans to cut costs, by closing two factories in Britain and a warehouse in Northern Ireland, and invest internationally to expand in India.Corbett said on Tuesday: "The cost savings from merging are less, we are performing better, we have new management and we have a new strategy to deliver good growth internationally as well as in the UK."He said that these "issues" will be discussed in August once the CC's final report is released "in order to ensure that it acts in the best interests of Britvic's shareholders".