Watchdog go-ahead but Britvic to get tough over drinks merger

SOFT drinks maker Britvic signalled it would drive a hard bargain if and when it resumes talks with smaller rival AG Barr, after the competition watchdog finally gave its blessing to a proposed tie-up.

Irn Bru-maker AG Barr and Britvic, behind the Robinsons and Tango brands, had agreed an all-share merger in November, which lapsed in February when the Commission launched its investigation.

Since then, however, Britvic has announced plans to cut costs, including the closure of a factory in Huddersfield, and expand in India, which was designed to strengthen its position regardless of whether the deal was allowed to go ahead.

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Speaking yesterday as the Competition Commission said it was inclined to approve the merger, Britvic chairman Gerald Corbett said the group was now in a “different place” from when it agreed the terms of the merger.

“The cost savings from merging are less, we are performing better, we have new management and we have a new strategy to deliver good growth internationally as well as in the UK,” he said.

“These are among the issues the board will reflect on in August once the Competition Commission’s conclusions are known in order to ensure that it acts in the best interests of Britvic’s shareholders.”

In contrast, AG Barr, which has a factory in Sheffield, released a short statement in response to the commission decision, saying it welcomed the statement and believed the provisional ruling was a positive step.

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A combination of the two companies would create one of Europe’s biggest drinks groups, bringing together the fizzy orange Irn-Bru, which outsells Coca-Cola in Scotland, with Britvic’s brands which include J2O and Fruit Shoot.

The Commission, in its provisional ruling, said it did not think the merger of the two would result in a significant lessening of competition. It will give its final decision by the end of July.

In February, the OFT’s decision to refer the merger drew an angry response from Mr Corbett, who said at the time: ‘’If this is industrial policy, I am a Frenchman.

“This is about two British companies getting together to take on Coca-Cola. The winners today are cracking open bottles of champagne at Coca-Cola in Atlanta, Georgia.”

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Hertfordshire-based Britvic, whose brands include Robinsons, Fruit Shoot, R Whites and Tango, has around 3,000 staff.

Retail sales of soft drinks in the UK amounted to £11.2bn last year and commission deputy chairman Alasdair Smith said that, given the size of the market, it was important to examine the likely effects of the merger.

He said: “Carrying out a full investigation gave us the chance to look in detail at consumer preferences.

“These told us that most consumers tend to see Barr and Britvic brands as distinct products rather than as close substitutes for each other.

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“Looking at consumer preferences and other evidence, we were able to conclude that the proposed merger was unlikely to substantially lessen competition.”

Britvic’s interim results, out last week, surprised the market with their better than expected potential for profitability.