Carlsberg has now corrected the omission from its £3bn+ bid for British (the UK soft drink firm that makes Robinsons barleywater, J2O and Tango, as well as R White’s Lemonade).
In pursuit of their “beyond beers” strategy, the Danes did not forget PepsiCo, which could end the adventure by taking the UK bottling right for Pepsi and 7Up from Brivic, under a clause titled “change in control”. Carlsberg announced on Monday that the US fizzy drinks giant had agreed to waive this clause if a deal was made.
This takeover story seems to be a simple one of price, since no one in their right minds would buy Britvic if they didn’t have those rights. Britvic rejected bids at £12, £12.50 and on Friday. What level would the board have to concede in its usual boring manner and declare fair value?
Britvic’s directors might have strengthened their resolve by drinking something more than Fruit Shoot. If they really believe the bullish talk they made in their half-year results last month about “market leading growth”, “multiple growth spaces”, and “our track record of delivering exceptional returns for our investors”, then they should be ready for a fight.
Britvic can now look forward to a return to normal trading conditions for the first in many years. After a sugar-tax, a pandemic, which slashed high-margin pub and restaurant sales, and a sudden surge in inflation of raw materials used for packaging, the future looks good.
Britvic has a smaller operation in Brazil that is growing at a decent clip. As an added bonus, the company has a small operation in Brazil which is growing at a good clip.
The numbers justified the share price’s return to a level close to £10 before the pandemic. Analysts in the city expect profits this year to exceed £200m and earnings per share will improve at an average rate of 10% for the next two years. The board was justified in rejecting £12.50, calling it a “significantly undervalued” price.
Carlsberg is the party that appears to have the most strategic dilemma, which may surprise you given its size and fame. The beer business of Marston in the UK is the fourth largest in the UK market. It would rather have the UK as its largest market than China. It wants to reduce its dependence on beer, at a moment when alcohol consumption per capita in Western Europe is declining. Britvic is a good choice because it offers easy distribution cost savings in the UK. These factors mean that the target will also have to be willing to work hard for it.
Matthew Webb of Investec believes that £13.50 or a 39% increase in the share price prior to the excitement “would be sufficient to close the deal”. Britvic’s board could argue that they should demand more. Think £14 for the company to give up its independence. Remember that you can only sell the company one time, and the UK stock market is notoriously bad at valuing FTSE 250 firms fairly. Only fizzy terms will do.
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