When news of Carlsberg’s shock £3.1bn bid for Britvic broke, investors in the companies had wildly divergent reactions, underscoring doubt about the wisdom of the brewer’s approach.
Britvic announced to the market last Friday it had rejected two takeover approaches from Carlsberg, the latter for 1,250p per share, valuing Britvic at around £3.1bn.
The Robinsons producer dismissed this second bid on 17 June as it “significantly undervalues Britvic, and its current and future prospects”.
The proposal was Carlsberg’s second bid, having initially tabled a 1,200p offer on 6 June.
Carlsberg said it believed its bid represented a “compelling opportunity for Britvic shareholders”, pointing out the 1,250p bid was a 29% premium to its share price of 970p on 19 June.
Carlsberg now has a deadline of 19 July to confirm whether it will return with a higher offer.
The brewer is expected to return to the table after announcing on Monday that PepsiCo, which has a bottling arrangement with Britvic, has given it the go-ahead to continue its pursuit.
However, Carlsberg investors gave the potential acquisition a thumbs-down, with the brewer losing 9.3% of its value on the news to trade back at DKK858.60, now down 20% year on year.
Analysts at Barclays noted: “We are sympathetic to the ‘on paper’ benefits of this deal, such as increase of scale in the UK and lowering group reliance on China. However, we are particularly concerned that this appears to be the ‘best of the least attractive’ deals… In our view, Carlsberg would most prefer to increase its exposure in South Asia [or] buy more breweries in Europe.”
Bernstein questioned the negativity: “Although expanding in European soft drinks and doubling down on the UK is not the sexiest strategic initiative, we see potential attractive returns… However, the market is going to need an awful lot of hand-holding if the deal does go through.”
From a Britvic perspective, its shares rose 7.8% on Friday to 1,094p, a further 7.1% on Monday and were trading at 1,201p by Thursday lunchtime – an all-time share price high.
However, analysts at Peel Hunt said Carlsberg would have to up its offer considerably to succeed. “We believe it needs to be closer to 1,400p to gain much traction with the board and investors… … The offer looks light. The market also appears to believe that a revised offer of the correct magnitude looks a stretch given the disconnect between the tone of Britvic’s board and the level of increase previously tabled by Carlsberg.”
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