Soft drinks companies AG Barr and Britvic are to reconsider merger plans following the Competition Commission’s decision to clear the deal.
When the merger was announced last year, the two companies said the merger offered the opportunity to optimise the combined operational footprint, increasing manufacturing capacity utilisation and thereby enabling better leverage of fixed production costs.
Irn-Bru maker AG Barr signed a build-to-suit deal with Gazeley for construction of the 265,000 sq ft warehouse and production plant in August 2012. Britvic has one of the most famous automated warehouses in the country at Magna Park.
“It is expected that the combined group will be able to benefit from a reconfiguration of the supply chain,” they said at the time. “In particular, it is likely that the new facility that AG Barr is in the process of constructing in Milton Keynes will provide additional capacity which will offer greater flexibility for the combined group.”
The original plan for the merger lapsed in February after the Office of Fair Trading decided to refer it to the Competition Commission.
The Competition Commission is expected to publish its final report by 30 July, the statutory deadline for completion of its inquiry.
In a statement, the board of AG Barr said it “believes this is a significant positive step and in light of this will continue to work closely with the Competition Commission throughout the remainder of the inquiry with a view to reconsidering a merger”.
Britvic’s chairman, Gerald Corbett, also welcomed the decision but said: “Our company is in a different place to last summer when the terms of the merger were agreed. The cost savings from merging are less, we are performing better, we have new management and we have a new strategy to deliver good growth internationally as well as in the UK.
“These are among the issues the board will reflect on in August once the Competition Commission’s conclusions are known in order to ensure that it acts in the best interests of Britvic’s shareholders.”