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Britvic cools on merger with Irn-Bru maker after deal approved

The proposals were reported to the Competition Commission earlier this year over concerns.

Generic of some Irn-Bru bottles at a factory owned by AG Barr

Drinks maker Britvic has raised doubts over its merger with Irn-Bru manufacturer AG Barr after the deal was provisionally approved by the Competition Commission.

The proposal to merge the two companies was announced in November 2012, but was reported to the regulator earlier this year over fears it could reduce competition between soft drink brands.

The Office of Fair Trading said it was concerned that two Britvic brands – Pepsi and Tango – were close alternatives to AB Barr brands Irn-Bru and Orangina and would raise competition concerns.

On Tuesday, the Competition Commission said the brands were "not close competitors".

However, on the back of the announcement by the commission, Britvic stated that it would review the proposed merger later this year, when the regulatory body releases its findings in the case in July.

Britvic's chairman Gerald Corbett said: "We welcome the Competition Commission's provisional findings and await their final conclusions by the end of July.

"In the meantime, as we enter our busiest time of the year, Britvic's management team, under our new chief executive, is focused on delivering its new strategy and continuing the trading momentum established in the first half of the year. This new plan, underpinned by £30m of cost savings, a proportion of which is to be invested in international growth, has now been communicated to our shareholders and has been well received.

"We are totally focused on the execution of this and delivering on the vision of a growing, international and increasingly profitable Britvic. Our company is in a different place to last summer when the terms of the merger were agreed. 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.

"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."

The directors of both firms stated previously the move will result in a "net reduction in combined group headcount" of between 8%-12% of the total 4280 workforce, which would equate to between 342 to 513 posts.

According to predictions released last year, the two firms expect to make annual savings of around £35m if the merger goes ahead, while Britvic shareholders would hold approximately 63% of the new company, while AG Barr would hold the other 37% stake in the firm.

Barr, based in Cumbernauld, and Britvic are two of the biggest soft drinks producers in the UK, in competition with Coca Cola. Barr’s brands include Irn-Bru and Orangina while Britvic produces Pepsi, Tango and Robinsons.

The Competition Commission said the merger was unlikely to cause prices to increase and would not push out smaller companies from the market.

Alasdair Smith, from the commission, said: "We have provisionally concluded that customers will not lose out from the merged Barr/Britvic. Given the size of this market and the number of consumers who could be potentially affected, it was important to examine the likely effects carefully.

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

In an announcement to the stock exchange on Tuesday, AG Barr welcomed the announcement from the commission.

It added: "The board of AG Barr believes this is a significant positive step and in light of this will continue to work closely with the Competition Commission throughout the remainder of the inquiry with a view to reconsidering a merger (although pursuant to the Takeover Code no new merger may be formally announced until the Competition Commission has published its final report)."

Gregg McClymont, Labour MP for Cumbernauld, Kilsyth and Kirkintilloch East, said: "Cumbernauld is the home of Barrs and we are proud of its success. More than 400 people are employed at Barrs Cumbernauld HQ and the impact of a merger with Britvic on the Cumbernauld HQ remains unclear. That's why we need clarity as soon as possible about this merger and its impact on jobs.

"The experience and skills of the local workforce have vital to that success and I'm sure that AG Barr will recognise this as they move forward."

Jamie Hepburn, MSP for Cumbernauld and Kilsyth, added: "This is an important step forward in this process and I welcome the clarity that this brings. This announcement was a long time coming but we now know that the Competition Commission is satisfied that this merger should be allowed to go ahead. AG Barr is a vital employer in the Cumbernauld area and I still have a number of concerns regarding any potential redundancies which may arise from the restructuring which such a merger could entail.

"I understand that the companies could not be clear about a number of the specific details of these changes before their merger had been given the green light but now that it has I am seeking further clarification. I have written today to the head of AG Barr to seek further information and to offer to meet to discuss what effect these changes may have on the local community and I will continue to monitor the situation closely."

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