Drinks groups AG Barr (LSE: BAG)and Britvic (LSE: BVIC)will not be getting together.
This is a shame for Barr's shareholders, as its management could have made a great success of Britvic and struck a great price. A Competition Commission enquiry cleared the deal, but it has taken too long: a change of leader at Britvic has seen the firm move on on its own.
This leaves Barr shares trading on over 20 times forecast earnings, with the bottom line growing at around 10% next year. Without a transformational deal, this is too high.
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There is talk of Barr bidding for GlaxoSmithKline's Ribena and Lucozade brands, but the asking price is likely to be steep due to lots of interest. The shares have gained 16% since I tipped them last October. I like this business, but it's time to take profits.
Britvic shares are up 14% since I tipped them in April and are cheaper on 16 times earnings. Cost cutting should drive profits for the next year or so, but it has to prove it can grow its sales consistently. They also look less attractive without a Barr tie-up. Take profits here too.
Verdict: take profits on both Barr and Britvic
Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.
After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.
In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for Moneyweek in 2010.
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