Recommended All-Share Merger of A.G. Barr p.l.c and Britvic plc

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For immediate release

RECOMMENDED ALL-SHARE MERGER OF A.G. BARR P.L.C. AND BRITVIC PLC

Summary

• The boards of A.G. BARR p.l.c. and Britvic plc are pleased to announce that they have reached agreement on the terms of a recommended all-share merger of A.G. Barr and Britvic, which is to be implemented by way of a scheme of arrangement of Britvic. It is proposed that the Combined Entity will be called "Barr Britvic Soft Drinks plc".
• The Merger will create one of the leading soft drinks companies in Europe, with annual sales of over £1.5 billion, a portfolio of strong brands and significant prospects for future growth.
• The Merger ratio will be 0.816 New A.G. Barr Shares for every Britvic Share held, resulting in Britvic Shareholders holding approximately 63 per cent. and A.G. Barr Shareholders holding approximately 37 per cent. of the issued share capital of the Combined Entity as at the Effective Date.
• The combination has compelling commercial and industrial logic given the high level of complementarity between the two businesses in terms of brands, sales channel presence and geographic presence within the United Kingdom.
• In addition, following preliminary analysis, opportunities for significant cost and net revenue synergies have been identified which underpin the industrial logic and shareholder value creation opportunity of the Merger. The boards of A.G. Barr and Britvic believe that the Combined Group will be able to achieve recurring annual cost synergies of approximately £35 million through overhead savings, procurement savings and supply chain enhancements. In addition to these cost synergies, the boards of A.G. Barr and Britvic believe that the Merger will provide an opportunity to achieve a contribution of at least £5 million from annual net revenue synergies through utilising the combined distribution channels, brand portfolios and geographic presence of the Combined Group. The boards of A.G. Barr and Britvic expect to build up synergies progressively, minimising risk, in order to achieve aggregate, full run rate synergies of £40 million in 2016.¹
• The boards of A.G. Barr and Britvic believe that the Combined Group will possess an attractive portfolio of strong and differentiated brands (including IRN-BRU, Robinsons, Fruit Shoot, J2O and Rubicon), with its portfolio well represented in key sub-segments of the soft drinks market.
• Britvic also enjoys a strong relationship with Pepsi and Pepsi is supportive of a combination of A.G. Barr and Britvic. Britvic has exclusive bottling and distribution agreements with Pepsi in Great Britain for a number of Pepsi brands including Pepsi, 7UP, Gatorade, Mountain Dew and SoBe, and for Pepsi, 7UP and Mountain Dew in Ireland. The Combined Group is committed to maintaining and developing its successful relationship with Pepsi. Conditional on the Merger becoming Effective, Pepsi and Britvic have agreed certain variations to the contractual terms of Pepsi's exclusive bottling and distribution agreements with Britvic (to reflect the operations of the Combined Group following the Merger) and, on the basis of these revised terms, Pepsi has agreed not to exercise any rights of termination it may have as a consequence of the Merger under these agreements.
• The Combined Group's brand portfolio will benefit from enhanced routes to market and is expected to drive opportunities for further revenue growth. Internationally, the Combined Group will enjoy significant presence in France and Ireland, and growing distribution of proprietary brands in markets such as the USA.
• The Combined Group's strategy will focus on creating value by driving both the availability of its brands and operational efficiency.
• The Combined Group will have a proven management team to be led by the current A.G. Barr CEO, Roger White, as CEO of the Combined Group, with John Gibney, the current CFO of Britvic, as CFO of the Combined Group. Gerald Corbett, the current Britvic non-executive Chairman, will become the non-executive Chairman of the Combined Group, and Ronald Hanna, the current Chairman of A.G. Barr, will become the non-executive Deputy Chairman of the Combined Group. The Combined Entity's board will also include a further six non-executive directors, three nominated from each of A.G. Barr's and Britvic's boards. Furthermore, the Combined Group will benefit from the collective talent of the respective management teams, who will focus on delivering the Combined Group's business strategy whilst delivering the integration of the two businesses.
• A.G. Barr and Britvic are both experienced operators with significant knowledge and expertise across the soft drinks sector. Both A.G. Barr and Britvic have recent experience of successful post transaction integrations. The integration of the two businesses will be managed by a dedicated integration team, bringing together the best relevant capability of both businesses, to facilitate a smooth and swift transition.
• Following the completion of the Merger, the Combined Group will benefit from a robust long term capital structure. The Combined Group's sources of funding will provide appropriate financial and strategic flexibility going forward which will be further enhanced by the delivery of synergies.
• It is proposed that the legal headquarters of the Combined Entity will be located at A.G. Barr's existing head office in Cumbernauld which will also remain its registered office, and its operational headquarters will be located at Britvic's existing head office at Hemel Hempstead.
• A.G. Barr and Britvic intend to pay dividends in respect of the period up to the Effective Date. A.G. Barr intends to declare a second interim dividend for the year ending 26 January 2013 of 7.4p per share to be paid on 18 January 2013 to A.G. Barr Shareholders on the register on 4 January 2013, in lieu of the final dividend for the financial year ending 26 January 2013. Together with the interim dividend of 2.6p per share paid to A.G. Barr Shareholders on 19 October 2012, this gives a total dividend for the year ending 26 January 2013 of 10.0p per share, an increase of approximately 7.5 per cent. on the dividend paid for the year ended 28 January 2012.
• Britvic intends to declare a second interim dividend in lieu of the final dividend for the financial year ended 30 September 2012 of 12.4p per share. Together with the interim dividend of 5.3p per share paid to Britvic Shareholders on 13 July 2012, this gives a total dividend of 17.7p per share for the financial year ended 30 September 2012, consistent with the prior financial year. The second interim dividend will be paid on 18 January 2013 to Britvic Shareholders on the register on 7 December 2012. Additionally, Britvic intends to declare a special interim dividend of 10.0p per share, conditional upon the Merger becoming Effective, in lieu of the dividend in relation to the period from 1 October 2012 until the Effective Date, and in recognition of the Combined Group's dividend policy. This will be paid after the Effective Date to Britvic Shareholders on the register at the Scheme Record Time.
• The Merger will be conditional on, amongst other things, the approval of A.G. Barr Shareholders and Britvic Shareholders and OFT clearance.
• A.G. Barr and Britvic have received irrevocable undertakings from those of the A.G. Barr Directors, their families and related trusts, and Britvic Directors and their families who hold or are beneficially entitled to A.G. Barr and/or Britvic shares, representing in aggregate 19.94 per cent. of A.G. Barr's share capital and 0.40 per cent. of Britvic's share capital respectively in issue on 13 November 2012 (being the latest practicable date prior to this announcement).

¹ These statements are not intended as a profit forecast and should not be interpreted to mean that earnings per A.G. Barr or Britvic ordinary share for the current or future financial years would necessarily match or exceed the historical published earnings per A.G. Barr or Britvic ordinary share.

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