Reuters: Hot Stocks: UPDATE 1-Cost-cutting plan bolsters Britvic ahead of merger decision

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UPDATE 1-Cost-cutting plan bolsters Britvic ahead of merger decision May 22nd 2013, 11:50 Wed May 22, 2013 7:50am EDT * Aims to make 30 mln stg of annual savings by 2016 * Over 300 UK jobs to go as 2 factories, warehouse close * Agrees Fruit Shoot deal with Narang Group in India * Awaits regulator's decision on merger with A.G. Barr * Shares up over 13 percent By Dasha Afanasieva LONDON, May 22 (Reuters) - British soft drinks maker Britvic announced plans on Wednesday to cut costs and expand in India, hoping to strengthen its position in case regulators reject a proposed merger with rival A.G. Barr or it has to renegotiate a deal. Britain's Competition Commission (CC) is expected to decide by July whether Britvic, whose brands include Robinsons, Tango and Fruit Shoot, can combine with Irn-Bru maker A.G Barr to create one of Europe's biggest drinks firms. The two companies agreed an all-share deal in November, but that lapsed in February when the CC launched its investigation and the firms have said they will return to the negotiating table, depending on what the regulator says. Britvic said on Wednesday it was focusing on its existing business and new chief executive Simon Litherland, who took the helm in February, unveiled plans to make 30 million pounds ($45 million) of annual cost savings, including over 300 job losses. The group also said it had struck a deal with Indian consumer goods company Narang Group to sell and distribute Fruit Shoot in the world's second most populous country from mid-2014. Analysts said the moves would put Britvic in a better position to cope if the merger with A.G. Barr falls through or to secure a better deal if it is cleared by the CC. "They're effectively saying that if we come to the table, we're going to want a bigger share of the pie because we can get these savings on our own," said Investec analyst Nicola Mallard. At 1100 GMT, Britvic shares were up 13.2 percent at 534.5 pence, the biggest rise by a UK mid-cap stock. Under the original merger deal, Britvic shareholders would have got 63 percent of the combined company, with A.G. Barr investors holding the rest. The tie-up would create a group with greater buying power and could allow A.G. Barr to benefit from Britvic's ties with big UK retailers, while Britvic could benefit from A.G. Barr's relationship with independent firms. Britvic, which produces PepsiCo Inc brands such as Pepsi, Mountain Dew Energy and 7UP in Britain and Ireland, also posted a 28 percent rise, using constant exchange rates, in first-half operating profit to 52 million pounds ($79 million). As a result, it forecast a full-year operating profit towards the upper end of its previous guidance range of 125-131 million pounds. However, Canaccord analysts said advertising spending had reduced, and questioned whether that was sustainable. "(This) reflects a material shift in spend from H1 to H2, raising the question whether this strong H1 performance is being driven by short-term dynamics ahead of the Competition Commission announcement," they said. Britvic said it aimed to achieve the 30 million pounds a year of cost savings by 2016. The plan includes closing UK factories in Chelmsford and Huddersfield, as well as a warehouse in Belfast by the first three months of 2014. The new strategy, including the loss of over 300 jobs from closures, would reduce group headcount by between 10 and 15 percent overall, it said. "Until we get the Competition Commission ruling, I need to run Britvic for the benefit of our shareholders," Litherland told Reuters. Link this Share this Digg this Email Reprints

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