Britvic recommends sweetened bid from Carlsberg

Carlsberg has agreed to buy British soft drinks maker Britvic for £3.3 billion, a move the Danish brewer said would forge a UK beverage “powerhouse” and that sent both companies’ shares higher.

Carlsberg clinched the takeover with a sweetened bid of 1,315 pence per share – comprising cash and a special dividend of 25 pence a share – after Britvic rejected 1,250 pence per share last month.

The acquisition will create value for shareholders, contribute to growth and forge a combined beer and soft drink company that is unique in the UK, CEO Jacob Aarup-Andersen told investors on a conference call.

“With this transaction we are creating a UK powerhouse,” he said.

He brushed off concerns from some analysts about integration risks, saying Carlsberg has a strong track record of running beer and soft drink businesses in several markets. Soft drinks already make up 16% of Carlsberg’s volumes.

Carlsberg’s shares rose nearly 4% in morning trade, before falling back to stand 3.1% higher a little later. Britvic rose nearly 5% and Marston’s jumped 15%, but both also pared gains throughout the morning.

Founded in Denmark in 1847, Carlsberg has a long history in Britain.It first shipped its beer to the UK in 1868 and started brewing in Northampton, England, in 1973. In the 1990s Carlsberg merged with the owners of Tetley’s ale and in 2020 formed a brewing joint venture with Marston’s.

As drinkers in some markets ditch beer for spirits or cut back on drinking altogether, brewers have looked to broaden their portfolio into new categories like hard seltzer, canned cocktails and cider, as well as zero-alcohol brews.

Britvic sells non-alcoholic drinks in Britain, Ireland, Brazil and other international markets such as France, the Middle East and Asia.

Carlsberg said the deal will deliver a number of benefits, including cost and efficiency savings worth £100m over five years as it takes advantage of common procurement, production and distribution networks.

It will also see Carlsberg take over Britvic’s bottling agreement with PepsiCo. Carlsberg already bottles PepsiCo drinks in several markets and there is scope to add more geographies in future, Aarup-Andersen said.

Carlsberg halted share buy backs today as a result of the deal.

Chief financial officer Ulrica Fearn said these would resume once Carlsberg reaches its revised target for net debt of 2.5 times EBITDA, from 3.5 times currently – a goal it expects to meet in 2027.

“Whilst this represents a shift in the strategy away from organic top- and bottom-line growth and consistent returns to shareholders, we view it as a relatively low risk transaction with attractive financials,” Jefferies analysts said in a note.

Britvic’s brands here include Ballygowan, MiWadi, Club, Cidona, TK and Fruit Shoot. In the UK, its popular brands include Robinsons fruit cordial and R White’s lemonade. It also bottles Pepsi drinks there.

Carlsberg also said today it will buy out UK pub group Marston’s from a joint venture for £206m. That will give it full ownership of the newly formed Carlsberg Britvic after the deal.