Britvic closes £3.3bn takeover by Carlsberg

Carlsberg has agreed to invest £3.3 billion to buy mixers and soft drinks maker Britvic.

The Danish drinks giant’s latest offer of £13.15 per share, which includes a special dividend of 25 pence per share, represents a 36 per cent premium to Britvic’s share price before the bidding period opened last month.

Britvic brings its mixed drinks and soft drinks, such as Tango and Robinsons Squash, under one roof with beer brands including Carlsberg, Kronenbourg and Holsten Pils.

In addition to the acquisition of Britvic, Carlsberg announced that it has acquired Marston’s 40 percent stake in the Carlsberg Marston’s Brewing Company for £206 million.

Britvic last month rejected two previous bids from Carlsberg, saying they undervalued the business and its future prospects.

Carlsberg said the acquisition will strengthen its relationship with PepsiCo, with which it has had a long-standing partnership in several core markets in Europe and Asia.

To ensure the deal goes ahead, PepsiCo has agreed to waive the change-of-control clause in its bottling agreements with Britvic.

PepsiCo currently grants Britvic exclusive rights in the British Isles to make and sell brands ranging from Pepsi Max to 7UP and Lipton Ice Tea.

Once the transaction closes, which the two companies expect to do in the third quarter of 2024, Carlsberg expects it to be immediately accretive to earnings and create value within three years.

The Copenhagen-based company also expects to achieve approximately £100 million in cost savings and efficiency improvements over a five-year period.

But the takeover will not be completed without the approval of three-quarters of Britvic’s investors. Britvic shares rose 4.9 percent to £12.68 on Monday afternoon.

Ian Durant, Britvic’s non-executive chairman, said the enlarged business was “well positioned to capture growth opportunities across multiple drinks sectors.

‘It is critical that Carlsberg’s agreement with PepsiCo provides the combined group with a strong platform for continued success as the market continues to be shaped by the trend towards increasing consolidation among bottling partners.’

Marston’s, which operates more than 1,370 stores in the UK, plans to use the proceeds from the sale to reduce net debt to below £1bn, at a significantly faster pace than its medium-term target.

The Wolverhampton-based group said the sale not only creates a healthier balance sheet but also allows it to focus on a pure hospitality business, while benefiting from its brand distribution agreement with CMBC.

Following the deal announcement, Marston shares rose 17.3 per cent to 36p in morning trading, making them the biggest gainer on the FTSE All-Share Index.

CMBC was formed in 2020, at the height of the COVID-19 pandemic, when Marston’s sold its brewing business to Carlsberg’s UK division for £780m.

When the merger was approved, Marston owned six breweries, including the now-closed Wychwood Brewery in Oxfordshire, which produced the Hobgoblin and King Goblin beers.

Carlsberg paid Marston £273 million upfront in exchange for a 60 percent stake in the business and the ability to sell its drinks brands, including Danish Pilsner, Kronenbourg and Somersby Original Cider, in the company’s pubs.

However, Marston’s said the joint venture was facing many “unforeseen macro and socio-economic factors” including inflation, Covid-19 and rising operating costs.

The UK brewing sector has been hit hard in recent years by the cost of living crisis, which has hit businesses and consumers alike, with rising energy prices weighing on revenues and profits.

The number of breweries going bankrupt rose by 82 percent in 2023, according to recent figures from accountant Mazars.

Marston’s also told investors that the sale of its stake in CMBC removes “the distraction of non-core assets” over which the company does not have day-to-day operational control.

Justin Platt, managing director of Marston’s, said the sale was “a significant milestone” for the company.

He added: ‘In my first six months with the company it has become very clear to me that our core competency and key opportunity to create value for shareholders lies in running a focused and successful pub business.’