* Merger to save an estimated 35 mln stg
* Britvic to own 63 pct of new company
* Britvic shares up 5.4 pct
* A.G. Barr shares up 3.9 pct
By Christine Murray
LONDON, Nov 14 Britvic has agreed the
terms of a 1.4 billion pound ($2.2 billion) merger with smaller
rival A.G. Barr, which should bring an end to a
turbulent three years for the British drinks maker.
Britvic, which makes and sells PepsiCo brands such
as Pepsi and 7UP in Britain, was hit this summer by poor weather
and a recall of its children's drink Fruit Shoot over faulty
caps. Quinns, the Irish drinks wholesaler it acquired in 2011,
has also performed below market expectations.
The all-share deal, which creates one of the biggest soft
drinks companies in Europe, will afford Britvic some stability
after a difficult few years, said Canaccord Genuity analyst
"Both players have a huge amount to gain, but in the short
to medium term, I think the Britvic shareholders should be
breathing a sigh of relief that a white knight has come around
the corner," he said.
Shares in Britvic climbed 5.4 percent to 388 pence at 1440
GMT, having fallen from a peak of 518 pence in July 2010. Shares
in A.G. Barr, the partly family-owned Scottish maker of Irn Bru,
were up nearly 4 percent.
A.G. Barr shareholders will own 37 percent of the enlarged
group, while investors in Britvic will own the rest - a split in
line with the relative market values of the two companies.
Highly rated A.G. Barr CEO Roger White will lead the group,
which is expected to achieve annual sales of 1.5 billion pounds.
Rothschild, which works as financial adviser to A.G. Barr,
has been working for five years on different ways to bring the
One driver behind the deal is a forecast for 40 million
pounds of synergies. Cost savings, including up to 500 job cuts,
are expected to account for 35 million pounds of the total. The
remainder would come from additional revenue.
The Scottish business stands to benefit from Britvic's
larger distribution network and relationship with big retailers,
while A.G. Barr has a stronger presence in independent markets
such as newsagents. The new group will also have increased
buying power in new markets.
Britvic has offered its shareholders a special dividend of
10p a share, conditional on the merger completing.
"That should act as a bit of a sweetener for Britvic
shareholders, some of whom have been complaining that they
weren't happy with the ratio," said Canaccord Genuity's Brown.
Britvic now has to persuade 75 percent of its shareholders
to vote for the deal, while A.G. Barr needs 50 percent approval.
The merger also has to be signed off by competition regulators.
A.G. Barr CEO White said that he sees the deal completing by