The list of UK-listed companies that have attracted foreign takeovers this year is long and significant.
It includes Anglo-Americanmining giant; International distribution services, the parent of Royal Mail; Darktrace, one of the world’s most formidable cyber security specialists, and DS Smith, a FTSE-100 packaging company that is Europe’s largest paper and cardboard recycler.
Added to that list this morning was Britvic, the soft drinks company behind popular brands such as Robinsons, J2O, Fruit Shoot, Tango, Aqua Libra, Ballygowan mineral water and R White’s lemonade, which is also the UK bottler for PepsiCo . Britain.
This morning it confirmed it had received two takeover approaches from Danish brewing giant Carlsberg this month.
The first valued it at £2.99 billion and was rejected. Introduced by Carlsberg, the world’s third largest brewery American giant AB InBev and Dutch group Heineken then returned with a second approach, valuing it at £3.1 billion.
It said this too was rejected because it “significantly undervalues ​​Britvic and its current and future prospects”.
Britvic shares jumped 10% on the news, but despite touching 1150p today, they are still trading at a discount to the 1250p offered by Carlsberg.
Carlsberg said today: “Carlsberg believes that a potential transaction would allow it to capture attractive long-term growth opportunities from Britvic’s comprehensive portfolio of leading brands in an attractive segment of the drinks market where Carlsberg already has a strong track record. “
Share the irritation of the price
Britvic’s approach comes as no surprise. The development of the company’s share price made it vulnerable.
The shares, despite strong gains since the first week of April, were changing hands at just 955p each at one point on Thursday and had yet to return to pre-pandemic levels until news of Carlsberg’s approach was published.
This allowed Carlsberg – known for its old advertising slogan “Probably the best lager in the world” – to pounce.
Britvic’s management has been irritated for many years by the performance of the share price and in particular by comparisons with Fever Tree, the tonic water and mixer maker that became something of a stock market darling after its 2014 IPO.
Fever Tree shares more than doubled over the following years and were valued at £4.5 billion at one point in July 2018.
Today, Fever Tree is worth £1.2bn, slightly less than half Britvic’s £2.54bn, despite Britvic’s sales for the last full year being five times that of its competitor.
This partly reflects some of the trading conditions that both have navigated over the past decade.
While Fever Tree was able to mine – up to inflation started – since moving to ‘premium’ in alcoholic drinks, Britvic has had to face the headwinds of sugar tax in the UK, its biggest market.
This forced it to ax a range of sugars from best-selling brands such as Robinsons squash and Fruit Shoot as it recalibrated to become a sugar-free business.
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It also had to deal with changing consumer tastes, which it achieved for example by buying the business that is now Aqua Libra; Plenish, a brand of healthy juices and shots, and Jimmy’s Iced Coffee, a fast-growing ready-to-drink iced coffee brand.
Over time, this development appeared to be winning over investors – as demonstrated by the rally in Britvic shares over the past few months.
This has also been helped by crowd-pleasing measures such as three share buyback programs in as many years.
Simon Litherland, chief executive, has struck an increasingly confident note in recent months and could point to solid growth in sales volume after May’s half-year results, despite the company passing on some cost increases to consumers.
This perhaps explains why Carlsberg has now moved. However, the price it is offering is not particularly generous, at just over 13 times Britvic’s earnings before interest, tax and accounting charges.
However, the Danish giant may be wary of going higher.
Carlsberg, which has been brewing in Northampton since 1973 and which, through its joint venture with Marston’s own best-selling cask beers such as Hobgoblin, Pedigree, Wainwright, Tetley and Bombardier, has been scalded by its latest major takeover in the UK.
In March 2008, it merged with Heineken, paying £7.8 billion for Scottish & Newcastle, the last major multinational British brewer.
The deal – struck just as the global financial crisis began – saw both sides overpay.
More critically for Carlsberg, the main attraction of the acquisition was that it gained full control of Russia’s largest brewing company, Baltika.
At the time, it seemed like a fantastic deal given Russia’s colossal – and growing – beer consumption. But Carlsberg had to relinquish ownership of the business after the Russian invasion of Ukraine.
Iconic brands
However, if Britvic were to be snapped up, it would be acquiring a business with an immense legacy. Britvic dates back to 1784 as a mineral water supplier – but the Britvic name itself dates back to the founding of The British Vitamin Products Company in the 1930s.
Among Britvic’s most iconic brands is R White’s, which dates back to 1845 – but is still loved by millions of Brits of a certain age for its iconic 1973 TV advert.
It featured a man in pajamas, played by actor Julian Chagrin, who sneaks downstairs in the dead of night to drink his favorite soda, only to be caught by his wife, played by actress Harriet Philpin.
At the heart of the ad was the song Secret Lemonade Drinker, composed by the late Rod Allen and sung by Ross MacManus, father of rock star Declan MacManus, better known as Elvis Costello – who provided backing vocals.
The award-winning ad ran for nine years and was later remade, with tennis superstar John McEnroe, children’s TV character Mr Benn and comedian Ronnie Corbett appearing as ‘the wife’, among others.
Chagrin – now with a ponytail – and Philpin reunited in 2012 to create an ad for R White lollipops in a similar vein.
A Carlsberg takeover would, ironically, reunite Britvic with one of its former owners.
For many years, the company was owned by three major British breweries – Bass, Whitbread and Allied Lyons, which in 1992 merged its brewing part with the British enterprise Carlsberg. The trio owned Britvic until November 2005 when it went public.
Britvic is no stranger to takeover talk either.
For many years, it was assumed that PepsiCo would acquire it due to the pair’s long-standing relationship.
It was also thought that Pepsi, whose brands such as 7UP and Rockstar Energy are exclusively distributed in the UK by Britvic, would always block any bid for the deal.
However, PepsiCo sold its remaining and long-held 4.5% stake in Britvic in 2017.
However, its relationship with Britvic is important and valuable enough that Carlsberg would be wise to get Pepsi’s blessing before making a firm offer. Probably.