Britvic/Barr Destined to go Flat?

Britvic plc is a big company.  Last year, it sold 1.9bn litres of soft drinks and it employs approximately 3500 people.  Brands include Tango, J2O, Robinsons as well as its eponymous mixer drinks.  It has a Scottish-based rival called A G Barr plc, makers of the iconic Scottish drink, Irn Bru (made from girders!), as well as Tizer and other well-known brands.  A G Barr is also a big player in the soft drinks market with a turnover last year of £237m.

Last year, there was heady talk of a merger between the two businesses. In September, a planned all-share merger between the two companies was announced, the plan being that the merger would take place in November.  The deal would have seen Britvic’s shareholders emerge with 63 per cent of the enlarged company but Roger White of Barr become chief executive.  That deal lapsed in February when the Office of Fair Trading referred it to the Competition Commission.  And there, it seemed, the matter was closed – until, that is, the Competition Commission gave its provisional approval for the deal this month.

Meanwhile, in February 2013, Britvic appointed a new chief executive, Simon Litherland, and he immediately embarked on a rationalisation plan for the business, including the closure of two factories and expansion of the business in the emerging market of India.  This plan, as far as Litherland and the Britvic board were concerned, “reduced the synergies from a merger with Barr from £40 million to £25 million” (the Times, 12 June 2013).

In the light of this, Britvic has let it be known that Mr Litherland would now take the top job in the event of the merger going ahead and that furthermore Britvic’s investors should receive a bigger slice of the pie as the price for agreeing a new merger deal.

In negotiating terms, this is one of two tactics

• either Britvic is structuring expectations away from the original deal in the light of changed circumstances
• or (and I wonder if this is not more likely) putting any merger “out of bounds” by attaching a condition that they know the other side will find unacceptable.

Although A G Barr issued a short statement welcoming the statement from the Competition Commission, it is widely believed that the founding Barr family, which speaks for almost 30 per cent of the shares, would not countenance handing the reins to Mr Litherland – making the prospect of a merger highly unlikely. 

Watch this space.