Drinks giants in £1.3bn merger talks

SOFT drinks group Britvic said it was in talks with Irn-Bru maker AG Barr about a £1.3bn merger, a move that could see it attract interest from private equity or rivals such as PepsiCo.

Both companies have suffered from poor weather this year, reflecting the wider economic impact of a sodden summer across the British retail sector.

Britvic, which makes and sells PepsiCo brands in Britain and Ireland, has had a torrid few months in particular. In July, it had to recall one of its top brands – Robinsons Fruit Shoot – over faulty caps, a move that could cut up to £25m from pre-tax profit in coming years.

Sign up to our Business newsletter

Sign up to our Business newsletter

The proposed all-share merger, the subject of recent reports, followed an approach by the smaller AG Barr that would see its shareholders own 37 per cent of the enlarged group with investors in Tango and J20 maker Britvic owning the rest.

That split was in line with the relative market values of the two companies at Tuesday’s closing prices.

The companies said the proposed merger would have “compelling industrial logic” and create significant synergies. These will likely centre on management cost savings, greater buying power and enhanced revenues from better market access.

Numis analyst Charles Pick said while AG Barr’s approach was opportunistic, Britvic was now in play. Britvic and AG Barr are required to announce their intentions by October 3.