AG Barr and Britvic announced yesterday that the OFT was extending its decision timetable on the merger from January 30, since it had not yet completed its review, with a February decision now expected.
Scottish MSP for Cumbernauld and Kilsyth, Jamie Hepburn, told BeverageDaily.com this morning that he understood November reports of some 500 potential jobs losses at AG Barr's site in Cumbernauld came from the companies themselves.
"If they had said 'we don't want to say that any jobs are going', then they could be held to this, I think for a year," he said.
Fears for AG Barr site jobs
It was not at all clear that up to 500 jobs would go, Hepburn added. "But they clearly felt they had to put something in, rather than being held to a 'no jobs will go' position".
"I have been in touch with AG Barr, and I understand why clarification on jobs has not been forthcoming. It's due to merger rules. But obviously I'm concerned about a degree of uncertainty," he said.
An OFT spokesman told this publication: “Such a delay is not that unusual, and we aim to work to an administrative timetable, which is laid out on our website. No inferences should be drawn from the fact that the dates have changed.”
The acid test is whether the OFT believes there was a realistic prospect that the £1.4bn ($2.25bn) deal may be expected to result in a ‘substantial lessening of competition’ in the UK market.
New review could take six months…
If this would not the case then it would clear the deal unconditionally, the spokesman said, but if there were then it could refer the case to the UK Competition Commission (CC).
The CC would then instigate a second-phase review, he added, a more in-depth look at the deal’s implications that could take up to six months.
Thirdly, the firms in question could propose undertaking in lieu of reference to the CC, he added, which could involve their making divestments.
The spokesman cited the 2011 example of Asda’s takeover of Netto stores in the UK, where it offered to sell 47 stores to rivals in areas where there was potential for “problematic overlap”.
‘Constant delays’ unhelpful – M&A expert
Julian Wild, corporate finance partner at law firm Rollits told BeverageDaily.com that a negative opinion from the OFT was a possibility, “particularly when they ask for more time to consider it”.
“I just think that sometimes, some of these competition investigations are actually very unhelpful and take too long,” he said.
“When the respective shareholders have voted to put this merger through, I think the constant delay in getting things through the competition authorities is not helpful to what otherwise looks to be a perfectly sensible merger,” Wild added.
“Frankly, in what is a pretty competitive marketplace within soft drinks, I think it’s pretty hard to see why the OFT would have much of an issue with it. This is a European, even, a worldwide marketplace.”
Panmure Gordon analyst Damian McNeela told this publication that he didn't envisage the OFT having any issues with the deal. "My understanding is that it is just a delay. Given the respective market shares of each company I don’t envisage any issues," he said.
If the OFT was worried about competition in specific areas, it could require the merged business to divest certain brands or activities, Wild added, stating that it was difficult to predict the outcome of the regulator's decision.