UK Regulator Inclined to Give Green Light to Britvic/Barr Merger

Final Ruling Expected by End-July

UK Regulator Inclined to Give Green Light to Britvic/Barr Merger

The UK Competition Commission said on Tuesday, June 11 that it was inclined to allow the proposed £2 billion merger between Britvic Plc (LON:BVIC) and A.G. Barr Plc (LON:BAG). If the transaction takes place, it will result in the formation of one of the largest soft-drinks companies in Europe. According to the regulator’s provisional ruling, the deal will not result in a significant lessening of competition. The final decision would be published by the end of July, the anti-trust regulator said.

The two companies agreed an all-share merger in November. While A.G. Barr welcomed the provisional ruling on Tuesday, the company’s larger peer said that the situation had changed and it would drive a hard bargain if and when it resumed talks over the deal.

The Britvic share price was about 1.10 percent down at 495.00p in London as of 11.19 GMT on Tuesday. The A.G. Barr share price was marginally down at 507.50p.

In a different place

A lot has happened at the England-based Britvic since the Commission began its investigation of the planned deal, including the appointment of Simon Litherland as Chief Executive Officer in February. Litherland has announced plans to close two factories with the loss of up to 400 jobs as part of a £30 million cost-cutting plan and to expand into the Indian market. These moves have been aimed at strengthening the company’s position regardless of the outcome of the merger plan. According to Britvic’s Chairman Gerald Corbett, the company is now in a “different place” from November when the agreement was reached.

“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,” Corbett said on Tuesday, as quoted by The Times.

He added that the board would consider these and other issues in August, once the Competition Commission’s final ruling was known, to ensure that “it acts in the best interests of Britvic’s shareholders.”

The Britvic share price has reflected the improved performance of the company, having gained more than 21 percent since the start of the year.

Soft drinks leader

The potential combination of the two UK companies will result in the formation of one of the biggest soft-drinks groups in Europe and will bring together well-established brands. Scotland-based A.G. Barr makes Irn-Bru, which outsells Coca-Cola in Scotland. Britvic also owns a number of popular brands, including J2O and Fruit Shoot.

The Britvic share price was 494.42p as of 12.12 GMT, 11.06.2013

The A.G. Barr share price was 512.00p as of 12.16 GMT, 11.06.2013

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