Britvic recommends £3.3bn cash takeover by Carlsberg

09 Jul, 2024
Tony Quested
Danish brewer Carlsberg can finally raise a glass after its third takeover offer for Herts-based FTSE 250 soft drinks specialist Britvic hit the spot. The £3.3 billion cash offer has been recommended by the Hemel Hempstead-based Britvic board in double quick time after a £3.1bn bid was recently rejected as too low.
Photograph credit: Carlsberg Group.

The accepted figure is on a fully diluted basis and an implied enterprise value of approximately £4.1bn. Carlsberg UK Holdings Limited (Bidco), a wholly owned subsidiary of Carlsberg A/S finally hit the right button.

Bidco is paying 1,290 pence in cash for each Britvic share plus a special dividend payment of 25p a share. The acquisition price represents a c36 per cent premium to the closing price of 970p per share on June 19 – the day prior to speculation about a possible offer.

It amounts to an implied enterprise value multiple of around 13.6 times Britvic's reported adjusted EBITDA of £303 million for the year to March 31.

The Britvic directors, advised by Morgan Stanley and Europa Partners, say they consider the terms of the acquisition to be fair and reasonable and intend to recommend unanimously that shareholders vote in favour.

Carlsberg recognises Britvic as one of the leading soft drinks businesses in Great Britain, Western Europe and Brazil and believes the acquisition represents a highly attractive opportunity for Carlsberg and supports its overall growth ambitions.

A spokesperson said: “The acquisition will build on Carlsberg's very successful bottling business in the Nordic region and deepen and strengthen its footprint in Western Europe, an important region that offers stable and attractive growth prospects.

“Carlsberg's intention is to accelerate commercial and supply chain investments in Britvic, driving the future growth trajectory of the business.”

The brewer intends to create a single integrated beverage company in the UK to be named Carlsberg Britvic – led by a management team comprised of individuals from each of Carlsberg, CMBC and Britvic.

The enlarged business will have a portfolio of leading brands across the beer and soft drinks categories. Carlsberg envisages that a phased integration will start as soon as practicable after completion of the acquisition and in conjunction with a post-completion review.

Carlsberg's portfolio of soft drinks currently accounts for approximately 16 per cent of total group volumes and 27 per cent of volumes in Western Europe.

It is expected that the deal will further strengthen Carlsberg's close relationship with PepsiCo, which has been a long-standing partner in a number of Carlsberg's core markets across Europe and Asia. Following completion Carlsberg is expected to become the largest PepsiCo bottling partner in Europe.

Carlsberg believes that the integration of Britvic could deliver annual cost savings and efficiency improvements in the region of £100 million (c£75m on a post-tax basis) over five years following completion.

Ian Durant, Non-Executive Chair of Britvic, said: "Britvic is an outstanding business with a strong heritage built on its portfolio of family-favourite brands, long-standing customer relationships, a well-invested supply chain infrastructure and a fantastic team of people across multiple markets.

“All these factors have supported a consistent track record of delivery for Britvic's stakeholders over a sustained period of time. The proposed transaction creates an enlarged international group that is well-placed to capture the growth opportunities in multiple drinks sectors.

“Crucially, to remain competitive at a time when the market is being shaped by the trend of increasing consolidation among bottling partners, Carlsberg's agreement with PepsiCo provides the combined group with a strong platform for continued success.

“The Board believe that the strategic merits of this offer are compelling, and the offer also provides shareholders with the opportunity to receive the certainty of cash consideration that reflects the current strength and medium-term prospects of the Britvic business.

“It also recognises the challenges of achieving an appropriate future rating and valuation for Britvic versus its historical range of trading multiples, alongside less certain long-term alignment with regard to its PepsiCo bottling business.”

Britvic announced the agreed Carlsberg deal on the day it posted a strong Q3 performance. Q3 revenue hit £502.9m, taking the year-to-date haul to £1,383.2m.

Britvic CEO Simon Litherland, said: “Trading in the quarter has been strong, with revenue increasing 6.3 per cent, benefiting from both positive price/mix and volume growth, and demonstrating the strength of our portfolio of brands. Encouragingly this was achieved despite poor weather this year and a tough comparable from last year when revenue increased 9.9%.

“Demand for our brands remains strong, as we enter the key summer trading period. We have an exciting programme of marketing campaigns, giving us confidence that we will deliver an excellent full year performance.”

Founded in England in the 1930s, Britvic – the largest supplier of branded still soft drinks in the UK – has grown into a global organisation with 39 much-loved brands sold in over 100 countries.

The brand portfolio includes Fruit Shoot, Robinsons, Tango, J2O, London Essence, Teisseire, Plenish, Jimmy’s Iced Coffee and MiWadi with PepsiCo brands such as Pepsi, 7UP and Lipton Ice Tea which Britvic produces and sells in Great Britain and Ireland under exclusive PepsiCo agreements.