Britvic and AG Barr are in talks over a possible merger

Britvic and AG Barr are in talks over a possible merger

It is the drinks industry's latest “will they, won't they” saga.

But, while Britvic and AG Barr have a month to decide if they want to merge, some analysts have already written their own happy ending. The only question is, for who?

“Our initial reaction is that the deal is more attractive for Britvic shareholders than for AG Barr shareholders,” said analysts Panmure shortly after the talks were announced today (5 September).

“We believe Britvic’s shareholders should benefit from an improved balance sheet and improved underlying earnings quality of an enlarged group.”

Panmure said another appealing aspect for Britvic was that it would take its bumbling management out of the picture, something remarked upon by most market watchers. If you're a Britvic executive, look away now.

Britvic shareholders should be relieved,” Canaccord Genuity told just-drinks, citing “management mishaps”.

In a note, Canaccord added: “This is the best result for the Britvic shareholders as the senior management team as well as board of directors would be significantly improved.”

Talking to the Financial Times, Numis analyst Charles Pick highlighted the strengths of the man earmarked to lead the combined group, AG Barr CEO Roger White. “Roger White is very respected in the City” thanks in part to a strong acquisition record at AG Barr, Pick said.

But also in the FT, Jamie Isenwater at Deutsche Bank said it was “a pretty raw deal for Britvic shareholders” as its operating profits are 3.5 times that of Barr's.

“This looks like an attempt by AG Barr to get control of underlying margin recovery at Britvic,” Isenwater said.

Isenwater seems to forget recent problems at Britvic, such as a product recall fiasco and profits losses caused by bad weather and under-performing brands.

As Canaccord put it: “Britvic was in a very tight corner,” 

Another string to AG Barr's bow is its planned GBP41.5m (US$66m) production and warehouse facility in Milton Keynes.

Canaccord said “the facility should double the can capacity and grow PET capacity” by about 40% by FY2014/15.

Panmure added: “We know that the Milton Keynes site has significant scope for expansion over and above the intended Phase I investment and this may be the source of synergy savings.”

The Milton Keynes site will be one of AG Barr's biggest bargaining chips in talks with Britvic as it has been designed all along with future expansion in mind. However, there will likely be a few more twists to this tale before the companies agree to move in together.

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