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Moody cloud hangs over Britvic, AG Barr talks to thrash out merger

By Ben Bouckley , 05-Sep-2012
Last updated on 06-Sep-2012 at 13:37 GMT

Picture Copyright: Britvic
Picture Copyright: Britvic

Britvic and PepsiCo licensee AG Barr are locked in discussions over a merger, and with the latter's CEO Roger White earmarked for the top job, one M&A expert told BeverageDaily.com that Britvic CEO Paul Moody 'appears to be the casualty'.

“A merger would create one of the leading soft drinks companies in Europe, with a strong portfolio of market leading brands,” both companies said in an online regulatory notice this morning.

Noting recent press speculation regarding a potential merger, the two companies revealed that AG Barr initially approached Britvic regarding the possible merger.

One City analyst, who wished to remain anonymous, suggested to BeverageDaily.com that such a move could prove attractive to Britvic, as an alternative to a potential hostile takeover bid from a larger firm.

His comments followed chatter at the end of August suggesting that one of either Permira, Diageo or Unilever could be poised to launch a potential takeover bid following Britvic's recent recall problems and muted trading.

The City Code on Takeovers and Mergers (Rule 2.6(a)) compels the firms to announce a firm intention to make an offer by 5pm on October 3, although that deadline could be extended.

Britvic forced on back foot...

"It only goes to show that Britvic have been forced down this particular route by recent events [including recalls relating to Fruit Shoot and Ballygowan water ] that have put them on the back foot," Rollits corporate finance partner Julian Wild told BeverageDaily.com.

(N.B. We tried several times to contact Britvic Ireland for the latest on the Ballygowan recall this morning, but on asking politely to be connected to the press office, the receptionist at the firm's Kylemore site repeatedly hung up on us.)

Discussing the disparity in market captilization of each firm, Wild agreed that the term 'merger' usually related to a 'merger of equals' (two companies of a similar size), although it was sometimes used more loosely.

"But this does look like a merger, one instigated by Barr on the back of Britvic's demise - it probably wouldn't have happened if it wasn't for Britvic's current situation, given that the latter is much the bigger business," Wild said.

"Barr's market capitalization is around500m [$627m] and Britvic's is close to900m. But Barr made the approach to Britvic, who have clearly seized their opportunity following the significant reduction in Britvic's share price, which has been on a pretty steady downward pitch since May."

Although discussions were still at an early stage, the firms said they had agreed certain key aspects in regard to the merger, although these are not set in stone.

New management composition

Britvic shareholders would own 63% of the enlarged group’s share capital and AG Barr 37%, while the board of directors would be drawn equally from both boards.

Roger White, current CEO of AG Barr would be CEO of the combined group, and John Gibney, Britvic CFO would assume the same position within the new firm; there is no mention of a potential new position for Britvic CEO Paul Moody.

Gerald Corbett, Britvic chairman, would become chairman of the combined group, while Ronnie Hanna (AG Barr chair) would assume the position of deputy chairman.

Six other non-executive directors would comprise the new board, with three nominated from each company.

Moody heads for exit door?

"These things are always something of a compromise. Corbett from Britvic would be the new chair, and very often accommodating members of the board is key to getting such a deal done," Wild said.

Quizzed about Moody's future, Britvic told this publication it had nothing to add to this morning's statement. But Wild said: "Inevitably, it appears to be the case that Moody is the casualty. He's not going to be the CEO of the combined group, so one would assume he was heading for the exit door."

A spokesman for AG Barr declined to comment on the rationale behind White's possible new position.

"This is a merger, even though AG Barr approached Britvic. Board positions would be split equally, with a Britvic chair, an AG Barr CEO and a Britvic CEO, split non-executive. You can't expect me to comment further," he said.

AG Barr and Britvic said in their statement that a "combination would have compelling industrial logic and represents an opportunity for both companies to enhance their industry position, and achieve significant synergies and shareholder value".

Wild agreed there was a strong strategic rationale for a merger to create a "very substantial European soft drinks business".

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