On July 8th 2024, Danish beer brewing company Carlsberg announced their acquisition of British soft drinks company Britvic, creating a pro-forma entity called Carlsberg Britvic. The deal is being financially advised by JP Morgan, Morgan Stanley and Europa Partners for Britvic, and Nomura for Carlsberg. The deal closed at a value of £3.3 billion, or £13.15 a share, after multiple rejections in prior takeover attempts by Carlsberg. In fact, the offers of £2.99 billion and £3.1 billion, both in June 2024, were rejected on the grounds that they had undervalued the company. The deal offer is comprised of £12.90 in cash and a special dividend of 25 pence per share, reflecting an implied adjusted EBITDA multiple of 13.6x.
Carlsberg is a multinational brewer with a rich history of since it’s inception in 1847, and is currently the 6th largest global brewery based on revenue. The firm currently has over 140 brands in its beer portfolio which are enjoyed in over 125 geographies. Soft drinks currently make up 16% of Carlsberg’s volumes, but with the announcement of this acquisition, this is intended to increase to 30%. Britvic, originally founded as the British Vitamin Products Company, is a British soft drinks producer and distributor. Britvic’s global prominence in the soft drinks market is commendable, with household brands such as Robinsons, J20 and Fruit Shoot in their product portfolio. Britvic also owns an exclusive license with PepsiCo in Great Britain and Ireland to manufacture and distribute Pepsi Max, 7UP, Rockstar Energy and Lipton Ice Tea. This contract will be extended to Carlsberg following the merger, which is significant as PepsiCo and Carlsberg have had a well-established commercial partnership for over 25 years. This acquisition thus makes Carlsberg the largest PepsiCo distributor in Europe.
This deal represents a strategic shift for Carlsberg into the soft drinks market, a move that has been cited to create a UK beverage “powerhouse”. The product line diversification into soft drinks is in line with Carlsberg’s ambitious growth plan of 4-6% annually by 2027, considering that UK beer market volumes actually declined in 2023. Whilst some have remained skeptical regarding integration risks, Carlsberg has historically had a strong track record of running beer and soft drinks businesses in several markets. The deal will create a new integrated UK beverage company called ‘Carlsberg Britvic’, that will deliver an estimated £100 million in cost and efficiency savings as Carlsberg begins to take advantage of common procurement, production and distribution networks. Both beer and soft drinks are viewed as highly synergistic products, considering that both are sold in cans and also have almost identical logistics and distribution considerations.
On the same day, it was announced that British brewing company Marston’s also sold their 40% stake in their brewing company joint venture with Carlsberg for £206 million, giving Carlsberg complete ownership. This cements the strategic approach that Carlsberg has taken, as they aim to consolidate market share in the UK with the scope for significant geographical and product expansion in the future. From an initial perspective, the Carlsberg Britvic merger seems to be a relatively low risk transaction with attractive top-line and bottom-line financials, yet it will be important to view whether these synergies materialise.
Written by Siddh Patel
Sources: Reuters, Carlsberg Investor Relations
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