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Britvic has long appeared an anachronism. Down at the Druids Head in Brighton, for as long as I can remember, it sold orange juice in the smallest bottles for the highest prices. One often mused as to how it could survive when the supermarkets sell great cartons of freshly squeezed with a competitive mark-up.
Robinsons, its other main brand, will shortly make its annual appearance at Wimbledon. It also brings back memories of sun-kissed birthday parties from childhood. In an age of healthy and energy-giving beverages, cordials appear awkwardly dated.
Not it seems to Danish brewer Carlsberg. In a world when alcoholic drinks are being diluted, mixers and soft drinks are coming back into fashion. The UK is good at fizzy drinks. Schweppes crossed the Atlantic way back in 2005 thanks to the ministrations of activist investor Nelson Peltz. He did entrepreneurship a favour. Fever-Tree, which uses superior ingredients, has filled a gap in the UK market.
A G Barr, home to Scotland’s Irn-Bru (as well as Lucozade), carries on regardless. With exquisite timing, after Denmark somewhat humiliated England in the Euros, it has been disclosed that brewer Carlsberg, which claims a UK heritage dating back 300 years, is seeking control of Britvic with a £3.1billion bid.
The board chaired by Ian Durant, a Hanson acolyte who has occupied the chair at Greggs, has told Carlsberg to take a hike twice.
Considerations: Making the case to keep Britvic British is tricky as there is no overwhelming national interest at stake
The Danes now have until July 19 to provide an enhanced cash offer. Goldman Sachs International, Britvic’s biggest investor with a 8.29 per cent stake, will have a significant say. Britain’s long funds are way down the list of owners. M&G, with a substantial 4.7 per cent holding, is in sixth place.
Encouragingly for Labour, a shift leftwards in British politics is not discouraging animal spirits. Quite the contrary, the bids keep coming. Among those live is the unwanted £3.6billion bid by Czech sphinx Daniel Kretinsky for International Distribution Services, owner of the Royal Mail. Labour pledges in its manifesto to ‘robustly scrutinise’. Another bid is the £5.4billion offered by private equity and a sovereign wealth fund for investment platform Hargreaves Lansdown.
A succession of high-profile bids and deals is testimony to the undervaluation of stocks on the London Stock Exchange. Deals can be resisted as Anglo-American, Currys and Direct Line have demonstrated. The loss of the dividend tax break in 2007 led pension fund managers to look more globally for returns, leaving the City in the doldrums.
The Chancellor Jeremy Hunt is seeking to mobilise investor cash and bring it back to the UK. Shadow Chancellor Rachel Reeves has similar ideas. It is hard for everyone who believes in Britain’s excellence as a financial hub to watch the FTSE 350 being denuded so easily.
Making the case to keep Britvic British is tricky. Unlike Royal Mail, there is no overwhelming national interest at stake. There are other considerations which the next government, whatever its stripe, needs to think about.
Many overseas takeovers – Cadbury and Boots come to mind – have had consequences for tax, pensions, intellectual property and jobs.
Among the first steps taken by predators is to change tax domicile of targets, depriving HMRC of corporate tax revenues. Consolidation is a polite word for axing factories and jobs and moving production to lower cost countries such as Poland.
Britain’s talent for innovation is unheralded. In the case of Britvic, the intrinsic value of low sugar drinks, such as Pepsi Max and premium mixers London Essence, fails to be recognised in the offer price.
The Tories are always keen to make the case that post-Brexit foreign takeovers show Britain is open still for business. The history of Arm Holdings, the UK’s biggest tech escapee, shows how wrong that judgment will be.
There is no reason to think that Carlsberg will be a particularly harmful owner. Nevertheless, Britvic has a strong global footprint and is in a growth segment of the beverages industry. If the Danish company comes back with what seems a compelling offer, Britvic’s directors must resist temptation to roll out the barrel.
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