Fri, 15 Feb 2013 | MERGER
Drinks giants Britvic and AG Barr have promised that a merger between the two companies would not harm consumers.
The businesses were due to enter into a £2 billion merger deal this month, but progress was halted when the Office of Fair Trading (OFT) took a surprise decision to refer things through to the Competition Commission.
Fears of an increase in prices on some brands were behind the decision to refer the merger. It added that many people viewed Barr's Irn Bru and Orangina brands as alternatives to Britvic's Pepsi and Tango, so bringing the two together could reduce competition in pricing. But a joint statement from the two groups insisted that the deal “would not result in a substantial lessening of competition”.
Gerald Corbett, chairman of Britvic, said that he was “bemused” by the decision to refer the deal to the regulator, especially given that even once combined the two companies would only have a 14 per cent share of the soft drinks market, half that of Coca-Cola Enterprises.
Britvic may be particularly disappointed in the delay as the firm has seen a number of profits warnings flagged up in the past three years. A merger with Barr would help give it a more positive outlook for a sustainable future, even if there would need to be some significant restructuring to get an agreeable deal in place.
The OFT will publish confirmation of the ruling next week along with further details about the referral but it looks likely that a six-month investigation by the Competition Commission will go ahead. If the companies receive clearance at the end of this investigation they confirmed that they would “each reconsider, at that time, the terms of a possible merger”.
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