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Last updated: November 14, 2012 4:21 pm
Scotland’s AG Barr – maker of Irn-Bru, which outsells Coca-Cola in its home market – had long sought a combination with Britvic, which makes Robinsons fruit squash, according to people familiar with the companies.
Its latest approach, billed as a merger but under which AG Barr’s chief executive will take the helm, came after a difficult summer for Britvic, which was hit by a costly recall of its Fruit Shoot drinks.
Protracted negotiations prompted two extensions to deadlines under the takeover code, but the broad terms set out on Wednesday were in line with those originally disclosed in early September. The shareholder split of 63 per cent for Britvic and 37 per cent for AG Barr shareholders mirrors the market capitalisations of the two groups.
The companies unveiled anticipated synergies of £35m rising to £40m from 2016, with £5m coming from revenue synergies. Cost savings from overheads, procurement and supply chain were described as conservative by Wayne Brown, analyst at Canaccord Genuity.
The merged group, to be called Barr Britvic Soft Drinks, will have annual sales of more than £1.5bn and employ about 4,300 staff.
Its legal headquarters will be at AG Barr’s head office in Cumbernauld, near Glasgow, while the operational headquarters will be in Hemel Hempstead, Hertfordshire, where Britvic is based.
By selling each other’s brands through their respective distribution channels and geographical locations, the companies aim to boost net revenues at the merged group by £5m each year.
“There are some very strong growth opportunities for the group to exploit once the merger is completed,” said Roger White, AG Barr’s chief executive.
The two companies have strength in different geographical markets and use different distribution methods.
Britvic has expanded into France and other European markets as well as the US in recent years, although the company suffered over the summer after it was hit by the Fruit Shoot recall and wet weather.
The merger partners said that PepsiCo had agreed variations to the contractual terms of the US soft drink maker’s exclusive bottling and distribution agreements with Britvic in the UK. They added it had agreed not to exercise any rights to termination it may have as a consequence of the merger.
Mr White will take the helm of the combined group while John Gibney, Britvic’s chief financial officer, will stay in that role at the larger operation. Gerald Corbett, Britvic’s chairman, will become chairman of the new group while AG Barr’s chairman, Ronald Hanna, becomes deputy chairman.
Rothschild advised AG Barr on the deal, while Citigroup and Nomura acted as financial advisers to Britvic.
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