Britvic in merger talks

British soft drinks maker Britvic plc said it was in merger talks with Irn-Bru maker AG Barr Plc and had already agreed on certain terms of the deal.

The proposed merger would have ‘compelling industrial logic’ and create significant synergies

The proposed all-share merger, which had been the subject of recent press speculation, followed an approach by AG Barr that would see its shareholders own 37 per cent of the enlarged group with investors in Robinsons and Tango maker Britvic owning the remainder.

AG Barr chief executive Roger White would be CEO of the combined group, the companies said, adding that the merger would create “one of the leading soft drinks companies in Europe“.

Canaccord Genuity analyst Wayne Brown said it appeared that discussions between the firms were actually well advanced, noting the proposal represents a seven per cent premium to Britvic’s closing share price of 328.6 pence on Tuesday.

“The AG Barr management team have a very strong track record and would add significant strength to Britvic from both an operational and financial performance perspective,” Brown added.

Britvic, which also produces and sells PepsiCo Inc’s brands such as Pepsi, Mountain Dew Energy and 7UP in Britain and Ireland, hit the headlines in July after recalling packs of its Robinsons Fruit Shoot and Fruit Shoot Hydro drinks over faulty newly designed caps.

The recall will cut up to £25 million from its profit before tax across the current and next fiscal years.

Its smaller peer AG Barr, best known for its bright orange Irn-Bru drink and exotic juice brand Rubicon, has focused on growing its presence in the UK and is investing £41.5 million in a new manufacturing plant in Milton Keynes, which could nearly double its capacity by 2014.

The two firms said the proposed merger would have “compelling industrial logic” and create significant synergies.

These are likely to center on management cost savings, greater buying power and enhanced revenues from better market access.