All share merger deal will lead to around 500 jobs being cut from a combined 4,300
IRN-BRU maker AG Barr and soft drinks giant Britvic have agreed terms to merge the two businesses.
The all share merger deal will lead to around 500 jobs being cut from a combined headcount of around 4,300 people.
The combined group, which will be called Barr Britvic Soft Drinks plc, will create one of the largest drinks company's in Europe with annual sales of more than £1.5 billion.
Both sides said in a statement, following preliminary analysis, “significant cost and net revenue synergies” had been identified which would see the combined group save around £35 million per annum.
This equates to earlier announcements the combined group would look to cut between eight and 12 per cent of the combined workforce of approximately 4,300.
No details have been provided as to where those job cuts may be made.
A further £5 million in savings have been identified by combining “distribution channels, brand portfolio and geographic presence”.
The merger is conditional on approval of AG Barr shareholders and Britvic shareholders and Office of Fair Trading clearance.
The combined group will be headquartered at AG Barr's existing head office in Cumbernauld and the operational headquarters will be located at Britvic's existing head office at Hemel Hempstead.
AG Barr chief executive Roger White will be chief executive of the combined group and John Gibney, currently chief finance officer of Britvic, will take up the role of chief finance officer for the combined group.
Gerald Corbett, the current Britvic non-executive chairman, will become the non-executive chairman of the combined group, and Ronald Hanna, the current chairman of AG Barr, will become the non-executive deputy chairman of the combined group.
The merged group's board will also include a further six non-executive directors, thee nominated from each of AG Barr's and Britvic's boards.
Britvic shareholders will hold approximately 63 per cent of the issued shares in the merged company and and AG Barr shareholders will hold a 37 per cent stake.
Shares in AG Barr rose 3.6 per cent in early trading on the announcement while Britvic shares rose by 2.9 per cent.
Britvic, which makes Tango, Robinsons squash, J2O, and Fruit Shoot, collectively sells 1.9 billion litres of soft drinks a year across 50 countries globally and employs 3,500 people.
Essex-based Britvic derives around 40 per cent of its annual sales from a tie-up with PepsiCo to sell its brands under licence.
Britvic, which is five times the size of Barr in revenue terms, was forced into an expensive recall of its Fruit Shoot brand in July, which was reported could cost the group upwards of £25 million.
AG Barr announced a drop in profits for the first half of the year in September down from £16.1 million the previous year to £14.8 million, despite a near five per cent rise in sales to £129.9 million.
Profits were hit by high raw material costs, particularly sugar, and changes in consumer purchasing behaviour due to the poor weather.
Ronald Hanna, non-executive chairman of AG Barr, said: "This is a unique opportunity to create long term value for both sets of shareholders through sustainable profitable growth, underpinned by significant synergy benefits.
“The combined group will have a broad portfolio of attractive soft drinks brands with representation in key sub-segments of the soft drinks market.
“The new business will enjoy significant growth potential in all sectors of the market through diversified and enhanced routes to market and the potential of increased international exposure.
“With a clear strategy, strong management team and tight financial control, the union of our two businesses will create real future potential."
Gerald Corbett, non-executive chairman of Britvic, added: "The merger of AG Barr and Britvic will create a world class soft drinks company.
“The combination makes huge commercial and industrial sense, bringing together a host of iconic brands from Robinsons Squash to IRN-BRU, as well as from the strong stable of Pepsi beverage brands, with very little overlap.
“AG Barr and Britvic are a fantastic fit with complementary strengths in products, channels and geographies and we will benefit from very significant synergies.
“Together we will create a bigger, better and stronger business for our consumers, customers and shareholders for now and the future.”