UK: Britvic more to lose than AG Barr if merger talks collapse - analyst

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AG Barr has less to lose than Britvic if the possible merger between the two groups does not happen, according to an analyst.


Earlier today (31 October) the companies announced that they have been granted another extension until 28 November to formally announce plans for a merger. This follows a previous request to the UK's Takeover Panel earlier this month

But, Canaccord Genuity analyst Wayne Brown, said that the second extension will spark concern that the merger is “more complicated than most had initially anticipated”. 

In a note, he said: “This (the delay) should come as no real surprise, considering the underlying financial challenges that Britvic faces set against the conservative and pragmatic nature of the AG Barr board.” 

However, if the merger plan collapses, Brown said that there would be “little downside for Barr, but “meaningful” downside for Britvic. 

“We would remain positive on AG Barr as it has long-term structural growth opportunities, with less than 5% share of the UK soft drinks market,” Brown said. 

With Britvic, however, Brown said there is more caution, noting high debt levels, a pension deficit of around GBP220m (US$354.8m) and rising investment costs following the Fruit Shoot recall and the poor performance of its wider portfolio.

“We acknowledge that there is significant recovery potential within the UK business, but note the continued challenges in Ireland and France,” Brown said. “We are cautious around the ability to fully capture this recovery opportunity in the UK as a standalone business.”

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

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