What was the OFT thinking when it referred the proposed merger of AG Barr and Britvic to the Competition Commission? Today, there wasn’t even a hint of concern in the Commission’s verdict.
In its preliminary findings, the Commission found no reason to block, or even modify, a deal.
Britvic and Barr can get back round the table, but half a year after they hammered out a deal, the two companies have moved on and an agreement is now far from certain.
With a new CEO on board, some better trading figures and a plan to slash costs, Britvic is keen to emphasize that it is in “a different place” and will undoubtedly be pushing for better terms that AG Barr may not be willing to accept. By referring the deal to the Commission, the OFT could have scuppered the chances of a tie-up.
That would be bad news for both companies but also for the industry and consumers.
The two companies would miss out on significant synergies and shared expertise. And the rest of us would miss out on having a big British company better able to hold Coca-Cola in check.
If the merger went ahead, the only real loser, apart from Coke, would be GSK – the company stands a much better chance of selling Ribena and Lucozade if Britvic and Barr stay apart.
It is not the first time that the OFT has stood in the way of a perfectly good merger deal.
Most recently, it referred the Booker-Makro deal and that too was cleared by the Competition Commission.
The deal went ahead anyway but in an environment where growth is hard to find, it doesn’t help having an OFT that is over-cautious. As well as preventing beneficial mergers, it could discourage some companies from getting round the negotiating table to discuss M&A opportunities in the first place.