Why Carlsberg is headquartered in Britvic | Business News

The list of UK-listed companies that have attracted foreign takeover approaches this year is long and distinguished.

Includes Anglo-Americanthe mining giant; International distribution services, parent company of Royal Mail; Darktrace, one of the world’s most exciting cyber security experts and DS Smith, the FTSE-100 packaging company that is Europe’s largest cardboard and paper recycler.

To that list was added this morning to Britvic, the soft drinks company behind such beloved brands as Robinsons, J2O, Fruit Shoot, Tango, Aqua Libra, Ballygowan mineral water and R White’s lemonade, and which is also a PepsiCo bottler in Greater Grão. -Brittany.

The company 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. He said that Carlsberg, the third largest brewer in the world after North American giant AB InBev and the Dutch group Heineken, later returned with a second approach, valuing it at 3.1 billion pounds.

It said it was also rejected because it “significantly undervalues ​​Britvic and its current and future prospects”.

Britvic shares rose 10% on the news, but despite touching 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 it to capture attractive long-term growth opportunities from Britvic’s comprehensive portfolio of leading brands in an attractive segment of the drinks market where Carlsberg already has a strong track record. . “

Stock price irritation

Britvic’s approach is no surprise. The company’s share price performance made it vulnerable.

The shares, despite a strong recovery since the first week of April, were changing hands at just 955p each at one point on Thursday and, until news of Carlsberg’s approach was made public, had still not recovered to levels observed before the pandemic.

This allowed Carlsberg – famous for its former advertising slogan “Probably the best beer in the world” – to pounce.

Britvic’s management has been irritated by its share price performance for many years and particularly by comparisons with Fever Tree, the high-end maker of tonic water and mixers, which became something of a stock market darling after its IPO in 2014.

Fever Tree’s shares more than doubled in the following years and at one point in July 2018 were valued at £4.5 billion.

Today, Fever Tree is valued at £1.2 billion, just under half of Britvic’s £2.54 billion, despite Britvic’s most recent annual sales being five times that of its rival.

This reflects, in part, some of the trading conditions they have both faced over the past decade.

Although Fever Tree managed to benefit – even inflation – following a movement towards the “premiumization” of alcoholic beverages, Britvic had to face the headwinds of a tax on sugar in the United Kingdom, its largest market.

This has forced it to withdraw entire sugar ranges from best-selling brands such as Robinsons squash and Fruit Shoot as it recalibrates to become a sugar-free business.

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It also had to deal with changes in consumer tastes, which it did, for example, by purchasing the business that is now 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, over time, appeared to be winning over investors – as demonstrated by the rally in Britvic shares in recent months.

This was also helped by public-pleasing measures such as three share buyback programs in as many years.

Simon Litherland, the chief executive, has sounded an increasingly confident note in recent months and in May’s half-year results could point to solid growth in sales volumes, despite the company passing on some cost increases to consumers.

This possibly explains why Carlsberg has changed now. The price it offers is not, however, especially generous, being just over 13 times Britvic’s earnings before interest, taxes and accounting charges.

The Danish giant, however, may be wary of moving up.

Carlsberg, which has been brewing in Northampton since 1973 and which, through its joint venture with Marston’s, has best-selling cask beers such as Hobgoblin, Pedigree, Wainwright, Tetley and Bombardier, has been scalded by the latest major acquisition it has made in the UK.

In March 2008, it teamed up with Heineken to pay £7.8 billion to Scottish & Newcastle, the last major British multinational brewer.

The deal – reached as the global financial crisis was underway – saw both sides overpay.

More critically for Carlsberg, the main attraction of the acquisition was that it gained full control of Russia’s largest brewing company, Baltika.

It seemed like a fantastic deal at the time, given the colossal – and growing – beer consumption in Russia. But Carlsberg had to give up ownership of the business following Russia’s invasion of Ukraine.

Iconic brands

However, if it managed to capture Britvic, it would be acquiring a business with immense equity. Britvic dates back to a mineral water supplier from 1784 – but the name Britvic itself dates back to the launch of The British Vitamin Products Company in the 1930s.

Among Britvic’s most iconic brands is R White’s, which dates back to 1845 – but which, for millions of Brits of a certain age, remains loved for its iconic 1973 television advert.

It featured a man in pajamas, played by actor Julian Chagrin, who goes downstairs in the dead of night to drink his favorite lemonade, but is caught by his wife, played by actress Harriet Philpin.

At the heart of the advert 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 backing vocals.

The award-winning advert ran for nine years and was later remade with, among others, tennis star John McEnroe, children’s TV character Mr Benn and comedian Ronnie Corbett making cameo appearances as the ‘wife’.

Chagrin – now sporting a ponytail – and Philpin reunited in 2012 to do an advert for R White’s lollipops along similar lines.

A takeover by Carlsberg would, ironically, reunite Britvic with one of its former owners.

The company was, for many years, owned by three major UK brewers – Bass, Whitbread and Allied Lyons who, in 1992, merged their brewing arm with Carlsberg’s British business. The trio owned Britvic until November 2005, when it was floated on the stock exchange.

Nor is Britvic a stranger to acquisition conversations.

For many years, it was assumed that it would be acquired by PepsiCo, due to the pair’s long-standing relationship.

It was also assumed that Pepsi, whose brands such as 7UP and Rockstar Energy are distributed exclusively in the UK by Britvic, would always block any bid for the business.

But PepsiCo sold its remaining 4.5% stake in Britvic in 2017.

However, the importance and value of its relationship with Britvic is so great that Carlsberg would do well to obtain Pepsi’s approval before moving forward with a firm offer. Probably.