AG Barr and Britvic insist on the ‘compelling commercial and industrial logic’ of an all-share merger to create one of the top soft drinks companies in Europe with a turnover of over £1.5bn.
As of the effective date, Britvic shareholders will own around 63% of the combined issued share capital – in the new firm Barr Britvic Soft Drinks – while Barr shareholders will hold around 37%.
The merger is conditional on approval from A.G. Barr Shareholders and Britvic Shareholders, as well as clearance by the UK Office of Fair Trading (OFT).
In a stock market announcement, Britvic noted its “strong relationship with Pepsi” (due to its exclusive bottling and distribution agreements in relation to brands such as Pepsi, 7UP, Gatorade, Mountain Dew and SoBe) and said the firm was supportive of a combination.
The boards of Britvic and Barr insisted they were both committed to maintaining and developing the relationship with Pepsi, and had agreed variations to contractual terms with the latter.
Upon this basis, both companies said that Pepsi had agreed not to exercise any rights of termination that it may have had as a consequence of the deal.
Citing complementary brands, sales channel and geographic presence in the UK, the companies also pointed to opportunities for significant cost and net revenue synergies that lent the merger value.
Recurring annual cost synergies of around £35m due to savings on overheads, procurement and supply chain improvements, the firms said, while an extra £5m could be gained from combined distribution channels, brand portfolios and geographic presence.
Strategically, the new group would focus on value creation by driving brand availability and operational efficiency, Britvic and Barr said, while growing distribution of its proprietary brands in markets such as the US.
Britvic’s Paul Moody appears to be the high-profile management casualty of the deal, where the combined group will be led by current Barr CEO Roger White.
John Gibney, current CFO of Britvic will assume the same title in the new group, as will current Britvic non-executive chairman Gerald Corbett; Barr chair Ronald Hanna will become new non-executive chair of the combined group.
A further six non-executive directors, three nominated from each of A.G. Barr's and Britvic's boards, will also sit on the Barr Britvic board.