The call from British listed companies to attract foreign takeovers this year is long and impressive.
It contains Anglo-Americanthe mining giant; International distribution services, the parent company of Royal Mail; Darktrace, one of the world’s most exciting cyber security specialists, and DS Smith, the FTSE-100 packaging company that is Europe’s largest cardboard and paper recycler.
Added to that list this morning is Britvic, the soft drinks company behind much-loved brands such as Robinsons, J2O, Fruit Shoot, Tango, Aqua Libra, Ballygowan mineral water and R White’s lemonade, and also the bottler of PepsiCo in Great Britain. Britain.
It confirmed this morning that it has received two takeover approaches from Danish brewing giant Carlsberg this month.
The first valued it at £2.99 billion and was rejected. It shows Carlsberg, after the third largest brewer in the world The American giant AB InBev and Dutch group Heineken, then came back with a second approach valuing it at £3.1 billion.
It said that too had been rejected because it “significantly undervalued Britvic and its current and future prospects”.
Britvic shares are up 10% on the news, but despite hitting 1150p today, they are still trading at a discount to the 1250p offered by Carlsberg.
For its part, Carlsberg said today: “Carlsberg believes that the potential transaction would enable the company to capture attractive long-term growth opportunities from Britvic’s extensive portfolio of leading brands in an attractive segment of the drinks market where Carlsberg already has a strong track record.”
Stock price irritation
The approach for Britvic comes as no surprise. The company’s share price development has made it vulnerable.
The shares changed hands at just 955p each at one point on Thursday, despite a strong rally since the first week of April, and had yet to return to pre-market levels until news of Carlsberg’s approach was made public reach pandemic.
That has enabled Carlsberg – famous for its old advertising slogan ‘Probably the best lager in the world’ – to enter the market.
Britvic’s management has been irritated for years by Britvic’s share price developments and especially by comparisons with Fever Tree, the more expensive manufacturer of tonic water and mixers, which became something of a stock market darling after its IPO in 2014.
Fever Tree shares more than doubled in subsequent years and were valued at £4.5 billion at one point in July 2018.
Today, Fever Tree is valued at £1.2 billion, just under half of Britvic’s £2.54 billion, despite Britvic’s most recent annual turnover being five times that of its rival.
That partly reflects some of the trading conditions both have experienced over the past decade.
While Fever Tree was able to take advantage of this – up to inflation After a move towards ‘premiumisation’ of alcoholic drinks, Britvic faced the headwind of a sugar tax in Britain, its largest market.
This forced the company to withdraw its entire sugar range from top-selling brands such as Robinsons squash and Fruit Shoot, as it recalibrated to become a sugar-free company.
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The company also had to deal with changing consumer tastes, which it did, for example, by acquiring the company now called Aqua Libra; Plenish, the healthy juice and shot brand, and Jimmy’s Iced Coffee, the fast-growing ‘ready to drink’ iced coffee brand.
These developments seemed to convince investors over time, as evidenced by the rally in Britvic shares over the past few months.
This was also helped by public-friendly measures, such as three share buyback programs in as many years.
Simon Litherland, the CEO, has become increasingly confident in recent months and could point to solid growth in sales volumes at its May half-year results, despite the company passing on some cost increases to consumers.
That may explain why Carlsberg has now moved. However, the price it offers is not particularly generous: just over 13 times Britvic’s profits, excluding interest, taxes and accounting costs.
However, the Danish giant may be reluctant to move up.
Carlsberg, which has been brewing in Northampton since 1973 and through its joint venture with Marston’s own best-selling cask beers such as Hobgoblin, Pedigree, Wainwright, Tetley and Bombardier, was steamrolled by the last major acquisition it made in Britain.
In March 2008 it paid £7.8 billion together with Heineken for Scottish & Newcastle, the last major British multinational.
The agreement, which came about as the global financial crisis took hold, left both parties paying too much.
More importantly for Carlsberg, the takeover gained full control of Russia’s largest brewery, Baltika.
It seemed like a fantastic deal at the time, given Russia’s colossal – and growing – beer consumption. But Carlsberg had to give up ownership of the company after the Russian invasion of Ukraine.
Iconic brands
However, if it were to succeed in securing Britvic, it would be taking over a company with a huge heritage. Britvic dates back to a mineral water supplier in 1784, but the name Britvic itself dates back to the launch of The British Vitamin Products Company in the 1930s.
One of Britvic’s most iconic brands is R White’s, which dates back to 1845 but is still loved by millions of Britons of a certain age for its iconic 1973 TV advert.
It shows a man in his pajamas, played by actor Julian Chagrin, sneaking downstairs in the dead of night to drink his favorite lemonade, but is caught by his wife, played by actress Harriet Philpin.
At the center of the ad was a 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 background vocals.
The award-winning advert ran for nine years and was later remade, with the likes of tennis superstar John McEnroe, children’s TV character Mr Benn and comedian Ronnie Corbett making cameo appearances as the ‘woman’.
Chagrin – now sporting a ponytail – and Philpin reunited in 2012 to create an ad for R White’s lollipops in a similar vein.
A takeover by Carlsberg would, ironically, reunite Britvic with one of its former owners.
For many years the company was owned by three major British brewers: Bass, Whitbread and Allied Lyons, who merged their brewing division with Carlsberg’s British operations in 1992. The trio owned Britvic until November 2005, when it was floated on the stock market.
Britvic is also no stranger to takeover talks.
For years it was believed that it would be acquired by PepsiCo due to the couple’s long-standing relationship.
It was also believed that Pepsi, whose brands such as 7UP and Rockstar Energy are exclusively distributed by Britvic in Britain, would always block any bid for the company.
But PepsiCo sold its remaining and long-held 4.5% stake in Britvic in 2017.
However, such is the importance and value of the relationship with Britvic that Carlsberg would be wise to obtain Pepsi’s blessing before making a firm offer. Probably.