Drinks maker A.G. Barr to buy Britvic for $1.4B

Scottish drinks maker A.G. Barr plc Wednesday, Nov. 14, agreed to make an offer for the larger Britvic plc to create a beverages group with annual sales of more than £1.5 billion ($2.4 billion).

The maker of Irn-Bru said it will offer 0.816 of a share per Britvic share, valuing Britvic's equity at £854.6 million based on A.G. Barr's Tuesday closing price. The offer equates to 352.78 pence per Britvic share and the resultant ownership split of 37:63 in Britvic's favor is unchanged from what the companies first announced in early September.

Management will be divvied up, with A.G. Barr CEO Roger White remaining at the helm, Britvic contributing the chairman and CFO to the enlarged Barr Britvic Soft Drinks plc, and A.G. Barr providing the deputy chairman.

The merger partners envisage recurring annual cost synergies of about £35 million and revenue synergies of at least £5 million a year. They expect to achieve the full quota of synergies in 2016.

"A.G. Barr and Britvic are a fantastic fit with complementary strengths in products, channels and geographies and we will benefit from very significant synergies. Together we will create a bigger, better and stronger business for our consumers, customers and shareholders for now and the future," said Britvic Chairman Gerald Corbett in a statement.

Shares of Britivic, of Hemel Hempstead, England, were up 10.8 pence, or 2.9%, at 379.10 pence by mid-morning Wednesday. A.G. Barr stock was up 15 pence, or 3.5%, at 447.20 pence, giving it a market value of £552.2 million. A.G. Barr said its Cumbernauld, Scotland head office will be the enlarged group's legal head office, with the operational headquarters to be located at Hemel Hempstead.

Both companies plan to pay additional dividends to their investors before the deal closes, with A.G. Barr paying out 7.4 pence per share, and Britvic 12.4 pence.

Britvic, the U.K. and Irish bottler and distributor for PepsiCo Inc., was this year hit by a product recall of its Fruit Shoot brand, poor summer weather and a sharp decline in Irish sales.

In a trading update last month it said sales in the year ended Sept. 30 declined 0.8% to £1.26 billion. Britvic expects full-year operating profit will be at the lower end of a £111 million to £119 million range.

A.G. Barr has been faring better. In the six months ended July 28 it posted sales of £130 million, up year-on-year from £124 million, with pretax profit of £15 million, compared with £16 million a year earlier. In September, however, it warned that challenging conditions will remain over the coming months and said it had put in place cost control measures to counter these.

The transaction needs clearance from both sets of shareholders and the Office of Fair Trading, whose approval of the deal without a referral to the Competition Commission is a key condition.

About 19.4% of A.G. Barr shareholders have agreed to the transaction, which the companies expect to close in February. The deal will lapse if it hasn't closed by June 30.

Akeel Sachak, Stuart Vincent and Manfredi Corsini of Rothschild are financial advisers to A.G. Barr, whose legal advice comes from a Dickson Minto WS team led by Colin MacNeill.

David Wormsley, Jan Skarbek and Andrew Seaton at Citigroup Inc. are advising Britvic, as is Normura International plc's Richard Snow and Nicholas Marren.

A Linklaters LLP team led by Owen Clay is providing Britvic's legal advice.