Carlsberg acquires Britvic for £3.3bn

Carlsberg has agreed to spend £3.3bn on buying blenders and soft drinks maker Britvic.

The Danish drinks giant’s latest offer of £13.15 per share, which includes a special dividend of 25 pence a share, represents a 36 per cent premium to Britvic’s share price before the offer period began last month.

It will bring together Britvic’s mixers and soft drinks, such as Tango and Robinsons squash, under the same roof as beer brands such as Carlsberg, Kronenbourg and Holsten Pils.

In addition to the Britvic acquisition, Carlsberg revealed it had bought Marston’s 40 per cent stake in Carlsberg Marston’s Brewing Company for £206m.

Britvic rejected two previous offers for Carlsberg last month because it said they undervalued the business and its future prospects.

Carlsberg said the acquisition will strengthen its relationship with PepsiCo, with whom it has enjoyed a long-standing partnership in numerous key markets in Europe and Asia.

To ensure the deal goes through, PepsiCo has agreed to waive the change of control clause in its bottling agreements with Britvic.

PepsiCo currently grants Britvic exclusive rights in the British Isles to manufacture and sell brands ranging from Pepsi Max to 7UP and Lipton Ice Tea.

Once the transaction closes, which the two companies expect to happen in the third quarter of 2024, Carlsberg expects it to be accretive to earnings immediately and value accretive within three years.

The Copenhagen-based company also expects to achieve around £100m in cost savings and efficiencies over five years.

But the acquisition will not go through without the approval of three-quarters of Britvic’s investors. Britvic shares rose 4.9 percent to 12.68 pounds by midday on Monday.

Ian Durant, Britvic’s non-executive chairman, said the enlarged business is well positioned to capture growth opportunities across multiple drinks sectors.

‘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.’

Marston’s, which operates more than 1,370 sites across the UK, aims to use the proceeds from the sale to reduce net debt to less than £1bn at a significantly faster pace than its medium-term target.

As well as creating a healthier balance sheet, the Wolverhampton-based group said the sale will allow it to focus on being a pure-play hospitality business while still benefiting from its brand distribution agreement with CMBC.

Following the announcement of the deal, Marston’s shares rose 17.3 per cent to 36 pence in morning trading, making them the biggest gainers on the FTSE All-Share index.

CMBC was formed in 2020, at the height of the COVID-19 pandemic, when Marston’s sold its brewing operations to Carlsberg’s UK division for £780m.

When the merger was agreed, Marston owned six breweries, including the now-closed Wychwood brewery in Oxfordshire, which produced Hobgoblin and King Goblin beers.

Carlsberg paid Marston £273m up front in exchange for a 60 per cent stake in the business and the ability to sell its drinks brands, such as Danish Pilsner, Kronenbourg and Somersby Original Cider, in the company’s pubs.

However, Marston said the joint venture had been hit by many “unforeseen macroeconomic and socioeconomic factors” such as inflation, Covid-19 and rising operating costs.

The UK brewing sector has been hit hard by the cost of living crisis that has affected businesses and consumers in recent years, with rising energy prices reducing revenues and profits.

According to recent figures from the auditor Mazars, the number of breweries going bankrupt will soar by 82 percent in 2023.

Marston also told investors that the sale of his CMBC stake “removes the distraction of non-core assets” over which he lacks day-to-day operational control.

Justin Platt, chief executive of Marston’s, said the sale “represents an important milestone” for the company.

He added: “In my first six months with the company, it has become very clear to me that our core capability and key opportunity to generate shareholder value is to drive a focused and successful pub business.”