Andy Morton

Analysis - Britvic cost cuts won't derail AG Barr merger

By | 5 June 2013

Britvic's sidelined merger with AG Barr is likely to go ahead despite a new cost-savings plan from Britvic that suggests it could go it alone, an analyst has said.

Investec's Nicola Mallard said in a note today (5 June) that there is “overlap” between a plan to save GBP30m (US$46.1m) a year, which includes the closing of three UK facilities, and what the merger was to deliver. However, “the strategic reasons for the merger remain intact; together Barr Britvic would be a stronger force in European soft drinks”, Mallard said.

Britvic announced its cost-savings plan last month as it reported a rise in first-half profits. A third of the savings are to be invested back into international operations, which are expanding with the growth of a Fruit Shoot concentrate model in the US and the brands upcoming entry into India. The total plan will cost GBP40m, Britvic said.

“There is some overlap between Britvic’s recently announced savings and the proposed merger synergies, but not a complete overlap,” Mallard said. “Hence, there are further potential savings still available if the merger were to progress.

“The portfolios and routes to market remain highly complementary,” she added.

Mallard said the Competition Commission, which halted the merger after it was referred by the Office of Fair Trading in February, is expected to rule in favour of the deal next month.

“We would expect both parties to at least sit and discuss a merger, even if the terms are slightly altered,” she said.

To see just-drinks' full coverage of AG Barr and Britvic's proposed merger, click here.

Expert analysis

Soft Drinks in the United Kingdom

Soft Drinks in the United Kingdom industry profile provides top-line qualitative and quantitative summary information including: market share, market size (value and volume 2007-11, and forecast to 2016). The profile also contains descriptions of the leading players including key financial metrics and analysis of competitive pressures within the market. Essential resource for top-line data and analysis covering the United Kingdom soft drinks market. Includes market size and segmentation data, textual and graphical analysis of market growth trends, leading companies and macroeconomic information.

Sectors: Mergers & acquisitions, Soft drinks

Companies: Britvic, AG Barr

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