Irn-Bru maker AG Barr has dramatically abandoned a £1.4bn plan to merge with rival soft drinks firm Britvic after an improved offer for the group behind Robinsons squash, Fruit Shoots and Tango foundered.
Cumbernauld-based Barr, which also owns the Rubicon and Orangina brands, as well as Forfar-based Strathmore Water, revealed it had made a revised offer for Britvic on “more favourable terms” this week, but the approach was rejected by its target.
It has now given up the chase, but says it remains “confident of its position as a standalone company”.
The move brings to an end a 10-month saga over the all-share reverse takeover, which would have created Europe’s biggest non-alcoholic drinks company.
First mooted in September, the tie-up had already been approved by shareholders on both sides when the Office of Fair Trading referred it to the Competition Commission earlier this year.
The commission released its final report this week, saying it was content that the merger would not “result in a substantial lessening of competition”.
But Hertfordshire-based Britvic has used the intervening months to tackle its own performance appointing a new chief executive in Simon Litherland, and launching a cost-cutting drive designed to create efficiencies of around £30m a year.
Its share price has risen steadily, making significant renegotiation likely to be required if agreement were to be reached on a new deal.
Nonetheless, Barr chairman Ronnie Hanna last night said he believed Britvic’s rejection of the improved terms would lead to the chance of realising better returns for shareholders being missed.
“While we are disappointed that the opportunity to create significant value for both sets of shareholders has been rejected, the board of AG Barr has every reason to be confident of its position as a stand-alone company,” he said.
“AG Barr continues to outperform the UK soft drinks market and will follow its successful long-term strategy supported by a strong balance sheet, unique brands and a well-invested asset base.”
Earlier this week Britvic chairman Gerald Corbett gave his firm’s clearest indication yet that the fizz had gone out of the deal, insisting that Britvic’s prospects remained “bright” even if a fresh agreement could not be reached. Last night his company said the new proposal represented “only a small improvement” on the earlier scheme, with Britvic investors picking up 65% of the enlarged firm at a “considerable discount” to present market capitalisation ratios.
The original deal would have seen Britvic’s shareholders’ equity account for 63% of the new group.
Barr boss Roger White had been earmarked as chief executive, with up to 500 jobs expected to be cut from a combined staff of 4,200.
Mr Corbett said the execution and delivery of the cost-cutting plan was now his team’s “absolute priority”.
“We wish Barr and its management team well,” he said. “They are good people with a fine business.”
Analysts have previously called for consolidation in the sector, and earlier this week said they believed a merger was still in the interests of both parties.
Shares in Britvic fell as low as 498.9p in the immediate aftermath of the news yesterday, but recovered to close down 10p at 512p. Stock in Barr closed up 0.50p at 522p.