The boards of A.G. BARR p.l.c. and Britvic plc have announced that they have reached agreement on the terms of a recommended all-share merger of A.G. Barr and Britvic, which is to be implemented by way of a scheme of arrangement of Britvic. It is proposed that the Combined Entity will be called “Barr Britvic Soft Drinks plc”.
The merger is expected to create one of the leading soft drinks companies in Europe, with annual sales of over £1.5 billion, a portfolio of strong brands and significant prospects for future growth.
The merger ratio will be 0.816 New A.G. Barr Shares for every Britvic Share held, resulting in Britvic Shareholders holding approximately 63 per cent. and A.G. Barr Shareholders holding approximately 37 per cent of the issued share capital of the combined entity as at the effective date.
The combination has compelling commercial and industrial logic given the high level of complementarity between the two businesses in terms of brands, sales channel presence and geographic presence within the United Kingdom.
In addition, following preliminary analysis, opportunities for significant cost and net revenue synergies have been identified which underpin the industrial logic and shareholder value creation opportunity of the merger. The boards of A.G. Barr and Britvic believe that the combined Group will be able to achieve recurring annual cost synergies of approximately £35 million through overhead savings, procurement savings and supply chain enhancements.
In addition to these cost synergies, the boards of A.G. Barr and Britvic believe that the merger will provide an opportunity to achieve a contribution of at least £5 million from annual net revenue synergies through utilising the combined distribution channels, brand portfolios and geographic presence of the Combined Group. The boards of A.G. Barr and Britvic expect to build up synergies progressively, minimising risk, in order to achieve aggregate, full run rate synergies of £40 million in 2016.
The boards of A.G. Barr and Britvic believe that the Combined Group will possess an attractive portfolio of strong and differentiated brands (including IRN-BRU, Robinsons, Fruit Shoot, J2O and Rubicon), with its portfolio well represented in key sub-segments of the soft drinks market.
The combined Group’s brand portfolio will benefit from enhanced routes to market and is expected to drive opportunities for further revenue growth. Internationally, the combined Group will enjoy significant presence in France and Ireland, and growing distribution of proprietary brands in markets such as the USA.
The combined Group’s strategy will focus on creating value by driving both the availability of its brands and operational efficiency.
The combined Group will have a proven management team to be led by the current A.G. Barr CEO, Roger White, as CEO of the Combined Group, with John Gibney, the current CFO of Britvic, as CFO of the combined Group. Gerald Corbett, the current Britvic non-executive Chairman, will become the non-executive Chairman of the combined Group, and Ronald Hanna, the current Chairman of A.G. Barr, will become the non-executive Deputy Chairman of the combined Group.
The combined entity’s board will also include a further six non-executive directors, three nominated from each of A.G. Barr’s and Britvic’s boards. Furthermore, the combined Group will benefit from the collective talent of the respective management teams, who will focus on delivering the combined Group’s business strategy whilst delivering the integration of the two businesses.
Commenting yesterday, Simon Bittlestone, Managing Director at the business analysis company, Metapraxis said:
“M&A activity has been much reduced in recent years, but today’s announcement of the merger between soft drinks companies Britvic and AG Barr is a reminder of the potential for such deals to improve the commercial position of firms and generate synergies to drive increased shareholder value.
”A merger of this scale has huge implications for information to run the enlarged business. Selecting and then implementing information systems for the new organisation typically takes several years.
“Meanwhile, board members, senior executives and managers need access to the right data and performance insights so they can make fully informed decisions rapidly and achieve the anticipated benefits of the merger.”