Britvic has long seemed an anachronism. At Druids Head in Brighton, orange juice was sold in smaller bottles at the highest prices for as long as I can remember. One often wondered how one could survive when supermarkets sell large cartons of freshly squeezed produce at a competitive profit margin.
Robinsons, its other main brand, will soon make its annual appearance at Wimbledon. It also brings back memories of sun-drenched childhood birthday parties. In an era of health and energy drinks, cordials seem strangely old-fashioned.
Danish brewer Carlsberg doesn’t think so. In a world where alcoholic beverages are diluted, mixers and sodas are back in fashion. The UK is good for fizzy drinks. Schweppes crossed the Atlantic in 2005 thanks to the services of activist investor Nelson Peltz. He did the business a favor. Using superior ingredients, Fever-Tree has filled a gap in the UK market.
AG Barr, home of the Scottish Irn-Bru (as well as Lucozade), continues despite everything. In an exquisite moment, after Denmark somewhat humiliated England at the Euros, it has been revealed that brewer Carlsberg, which claims British heritage stretching back 300 years, is seeking control of Britvic with a $3.1 billion bid of pounds sterling.
The board chaired by Ian Durant, a Hanson acolyte who has held the presidency at Greggs, has told Carlsberg to take a walk twice.
Considerations: Defending Britvic’s continued British status is complicated as there is no overwhelming national interest at stake.
The Danes now have until July 19 to offer an improved cash offer. Goldman Sachs International, Britvic’s biggest investor with an 8.29 per cent stake, will have a lot to say. British long-term funds are far down the list of owners. M&G is in sixth place with a significant 4.7 per cent share.
It is encouraging for Labor that a shift to the left in British politics does not discourage animal spirits. On the contrary, the offers keep coming. Among those alive is Czech sphinx Daniel Kretinsky’s unwanted £3.6bn bid for International Distribution Services, owner of the Royal Mail. Labor pledges in its manifesto to “vigorously scrutinize”. Another offer is the £5.4 billion offered by private equity and a sovereign wealth fund for the Hargreaves Lansdown investment platform.
A succession of high-profile bids and deals is testament to the undervaluation of shares on the London Stock Exchange. Deals can be resisted, as Anglo-American, Currys and Direct Line have shown. The loss of the dividend tax exemption in 2007 led pension fund managers to look for returns more globally, leaving the City in the lurch.
Chancellor Jeremy Hunt is seeking to mobilize money from investors and bring it back to the UK. Shadow chancellor Rachel Reeves has similar ideas. It is difficult for all who believe in Britain’s excellence as a financial center to see the FTSE 350 stripped so easily.
Arguing to keep Britvic in the UK is complicated. Unlike Royal Mail, there is no overwhelming national interest at stake. There are other considerations that the next government, whatever its colour, must think about.
Many overseas acquisitions (Cadbury and Boots come to mind) have had consequences for tax, pensions, intellectual property and employment.
One of the first measures taken by predators is to change the tax domicile of targets, depriving HMRC of corporation tax revenue. Consolidation is a polite word for laying off factories and jobs and moving production to lower-cost countries, like Poland.
Britain’s talent for innovation has not been heralded. In the case of Britvic, the intrinsic value of low-sugar drinks, such as Pepsi Max and premium London Essence mixers, is not recognized in the offer price.
The Conservatives are always keen to argue that post-Brexit foreign takeovers show Britain is still open for business. The story of Arm Holdings, the UK’s biggest tech fugitive, shows how misguided that judgment will be.
There is no reason to think that Carlsberg will be a particularly disruptive owner. However, Britvic has a strong global presence and is in a growing segment of the drinks industry. If the Danish company returns with what looks like a compelling offer, Britvic directors will have to resist the temptation to throw in the towel.
