- £13.15 per share bid recommended
- PepsiCo waiver key to deal
- Britvic sales up 6.3% in Q3
Another one bites the dust. Soft drinks maker Britvic (BVIC) will become the latest company to leave the London stock market after agreeing to Carlsberg’s (CARL-B:CPH) improved £3.3 billion takeover offer.
Shares in the Robinsons, Fruit Shoot and J2O maker fizzed up 5% to £12.70 after the FTSE 250 firm said it had unanimously recommended Carlsberg’s sweetened £13.15 per share bid.
Britvic rejected two earlier proposals from the Danish brewer pitched at £12 and £12.50 in June on the grounds they ‘significantly’ undervalued Britvic ‘and its current and future prospects’.
Carlsberg had been expected to come back with a better offer after PepsiCo (PEP:NASDAQ) agreed to waive the change of control clause in its bottling arrangements with Britvic, which has an exclusive licence with the US soft drinks-to-snacks giant to make and sell brands including Pepsi, 7UP and Lipton Ice Tea in the UK and Ireland.
WHY CARLSBERG IS THIRSTY FOR BRITVIC
Under the terms of the deal, Carlsberg will pay £12.90 in cash for each Britvic share and reward Britvic shareholders with a 25p special dividend on top; the £13.15 per share offer price represents a premium of roughly 36% to the undisturbed Britvic share price.
Carlsberg, which in a separate update said it is buying Marston’s (MARS) out of the pair’s brewing joint venture, has identified annual savings of £100 million over five years from the integration of Britvic.
The Danish lager leviathan said the takeover represents ‘a highly attractive opportunity for Carlsberg and supports its overall growth ambitions’.
It will also build on Carlsberg’s ‘very successful bottling business in the Nordic region, and deepen and strengthen its footprint in Western Europe, an important region that offers stable and attractive growth prospects. Carlsberg’s intention is to accelerate commercial and supply chain investments in Britvic, driving the future growth trajectory of the business.’
Crucially, the takeover will ‘further strengthen Carlsberg’s close relationship with PepsiCo, who have been a long-standing partner for Carlsberg in a number of Carlsberg’s core markets across Europe and Asia.’
Britvic’s non-executive chairman Ian Durant insisted the takeover ‘creates an enlarged international group that is well-placed to capture the growth opportunities in multiple drinks sectors. Crucially, to remain competitive at a time when the market is being shaped by the trend of increasing consolidation among bottling partners, Carlsberg’s agreement with PepsiCo provides the combined group with a strong platform for continued success.’
Britvic delivered a robust performance in the third quarter to 30 June 2024, despite dire weather in Europe and demanding prior year comparatives, with group revenue up 6.3% to £502.9 million thanks to price increases and volume growth.
‘Demand for our brands remains strong, as we enter the key summer trading period,’ commented CEO Simon Litherland.
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, said: ‘Carlsberg has prevailed in its pursuit of soft drinks firm Britvic, further thinning the ranks of the UK market and depriving investors of an opportunity to buy a company and stock which has enjoyed steady success since its 2005 IPO.
‘The writing was on the wall for Britvic as an independent entity when it emerged Carlsberg had secured a waiver on a change of ownership clause associated with a bottling contract Britvic enjoys with PepsiCo. Carlsberg wouldn’t have gone to the trouble of getting this detail if it wasn’t serious about getting the deal across the line.’
Mould added: ‘It probably isn’t the best price tag in the world for Britvic – only around 3% more in headline terms than a second bid which Britvic rebuffed on the grounds it was being significantly undervalued – but it is a fairly weighty premium to the undisturbed share price. It also includes the helpful kicker of a 25p special dividend to be paid before the transaction goes through.
‘Carlsberg’s acquisition of Britvic adds some diversification to its portfolio. The Danish outfit is having to react to a world in which younger age groups are less likely to indulge heavily in alcohol.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
