"Compelling industrial logic" sounds like the sort of quality that ought to survive a detour via the Competition Commission.
The terrific fit between Britvic, the Fruit Shoot folk, and AG Barr, the Irn Bru crew, was advanced last year by both companies as a reason to merge. But now the commission has given it a green light (the Office of Fair Trading's worries were always silly), only one side is enthusiastic. AG Barr is as keen as mustard but Britvic fancies independence.
Strange as it sounds, Britvic's stance makes sense. As originally conceived, AG Barr was getting the better end of the terms by a mile. The Scottish firm is a substantially smaller company but its investors would have gained 37% of the combined business. Britvic was prepared to suffer such financial indignity because a deal would have cured other problems, such as shareholders' demand for a new chief executive and fresh thinking after the damaging Fruit Shoot bottle cap recall last year.
But the recall is now history, Britvic's share price has recovered and new chief executive Simon Litherland, from cost-cutting maestros Diageo, thinks he can save £30m a year. Britvic, in other words, suddenly looks in control of events again. If it was that easy to restore confidence, why didn't Britvic chairman Gerald Corbett just change chiefs a year ago instead of talking to Barr? It's a fair question, but few big shareholders were arguing against the deal at the time. The bottom line today, though, is that Britvic doesn't have to negotiate from weakness.
It's tough on Barr, whose opportunistic move would have succeeded without the OFT's unnecessary fussing. But it's no good grumbling that "little has changed" apart from Britvic's "short-term cost-saving plan". Same-again terms wouldn't succeed.
Barr is free to offer better terms, of course. But Britvic might also now want a majority representation in the boardroom including the chief executive's slot, which might be a deal-killer from the Scottish point of view. A revised deal is not the way to bet – at least, not this year.
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