British soft drinks giant Britvic has accepted a £3.3bn takeover offer from Danish brewer Carlsberg.
The deal is worth £13.15 per share, which represents a 36% premium on Britvic’s closing price before its board rejected two initial bids last month. The second was worth £12.50 per share, or £3.1bn, which Britvic said “significantly” undervalued its business, whose brands include Robinsons, Fruit Shoot, J2O and Tango.
In a statement this morning, Britvic said that it considered the terms of the new offer as “fair and reasonable”.
The deal will allow Carlsberg to expand its drinks bottling operations in Britain. As well as producing its own brands, Britvic is PepsiCo’s bottler in the UK. Carlsberg is PepsiCo’s bottler in Norway, Sweden, Switzerland, and some countries in Asia.
Carlsberg stated that its intention was to “accelerate commercial and supply chain investments in Britvic, driving the future growth trajectory of the business”. It also noted that buying Britvic would take the brewer’s relationship with PepsiCo “to the next level”.
Alongside the Britvic deal, it was announced that Carlsberg has agreed to acquire Marston’s minority stake in the Carlsberg Marston’s Brewing Company (CMBC) for £206m. The two firms merged in 2020 to form the unit, which owns a portfolio of well-known beer brands alongside a distribution and logistics network. Marston’s said the deal would allow it to focus on its 1,400-strong pub estate. However, a long-term drinks supply agreement between the two firms will remain in place, ensuring the availability of CMBC’s brands across Marston’s pubs.
Carlsberg stated that it plans to create a single integrated beverage company in the UK called Carlsberg Britvic. It will be led by a management team comprised of individuals from Carlsberg, CMBC and Britvic, with a phased integration expected to start after the completion of the two deals.
The Danish brewer noted that the combined group would be able to take advantage of the “highly synergistic relationship between beer and soft drinks, including within the areas of procurement, production, warehousing and distribution to increase efficiency and better serve customer needs”.
Carlsberg expects the integration of Britvic to deliver annual cost savings and efficiency improvements in the region of £100m in five years following the completion of the deal.
With Britvic’s Board recommending the offer to shareholders, its Chairman Ian Durant said: “The proposed transaction 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.”
Jacob Aarup-Andersen, CEO of Carlsberg, added: “With this transaction, we are combining Britvic’s high-quality soft drinks portfolio with Carlsberg’s strong beer portfolio and route-to-market capabilities, creating an enhanced proposition across the UK and markets in Western Europe … We are excited about expanding our global partnership with PepsiCo and believe that the longer-term opportunities will be very beneficial for both companies.
“We are committed to accelerating commercial and supply chain investments in Britvic, and we are confident that Carlsberg Britvic will become the preferred multi-beverage supplier to customers in the UK with a comprehensive portfolio of market-leading brands.”
Meanwhile, Silviu Popovici, CEO of PepsiCo Europe, commented: “We believe that the combination of Carlsberg and Britvic will create even stronger sales and distribution capabilities for our winning brands in important markets. We look forward to continuing to expand the partnership into further important markets in the future.”
Carlsberg shares rose nearly 4% in morning trade. Britvic rose nearly 5% and Marston’s jumped 15%. “We view it (Britvic deal) as a relatively low-risk transaction with attractive financials,” Jefferies analysts wrote in a note.
In a brief trading update issued today, Britvic noted that it saw strong third-quarter performance despite poor weather in Europe. With 2.2% volume growth and positive price/mix, revenues rose 6.3% vs a tough prior year comparable growth of 9.9%. In Britain, revenue grew 6.6%, with both the retail and hospitality channels in growth.
CEO Simon Litherland said: “Demand for our brands remains strong, as we enter the key summer trading period. We have an exciting programme of marketing campaigns, giving us confidence that we will deliver an excellent full year performance.”
NAM Implications:
- The combined beer & soft drinks companies will benefit from synergies…
- …procurement, production, warehousing and distribution…
- …to increase efficiency and better serve customer needs.
- i.e. improved buying and selling muscle.
- All part of a global trend in increasing consolidation among bottling partners…
- …that will/should cause category members to reassess relative competitive appeal.
