Britvic and AG Barr in merger talks

FTSE 250 drinks companies Britvic and AG Barr have announced that they are in discussions about an all-share merger which would create 'one of the leading soft drinks companies in Europe'.

The companies confirmed press speculation on Wednesday morning by saying that AG Barr, the Scottish manufacturer of orange fizzy drink Irn-Bru and fruit juice brand Rubicon, had made an approach for Britvic, which makes Robinsons, J2O and Tango.

"The combination would have compelling industrial logic and represents an opportunity for both companies to enhance their industry position, and achieve significant synergies and shareholder value," the companies said.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

Shares in Britvic raced around 14% higher in morning trade, while AG Barr gained 2.5%.

At Wednesday's prices, AG Barr's market capitalisation is nearly £500m and Britvic's is close to £900m, leaving the combined value at £1.4bn.

As usual in these situations, the firms assured that discussions are still at a very early stage and there can be no certainty that discussions will conclude successfully. However, they did say that an agreement has been reached with respect to "certain key aspects of the merger".

Britvic shareholders would own 63% of the enlarged group, while AG Barr's shareholders would have a 37% stake.

The board of director of the new entity would be drawn equally from both companies, though current AG Barr Chief Executive Officer Roger White would become the frontman, while Brivic's Chief Financial Officer John Gibney would keep his role. The Chairman position would go to Britvic Chairman Gerald Corbett, while AG Barr's Ronnie Hanna will become the Deputy Chairman.