(Bloomberg) -- Carlsberg AS agreed to buy Britvic Plc for £3.3 billion ($4.2 billion) in a move that increases the Danish brewer’s presence beyond beer, combining two major bottlers of PepsiCo Inc. soft drinks.
The company is offering 1,315 pence a share, a 36% premium to the share price before news of the takeover interest was revealed. Britvic’s board is supporting the deal.
Carlsberg already made two previous bids — at 1,200 pence and 1,250 pence a share — that were rejected by the Britvic board.
Britvic’s shares rose as much as 5.3% in early London trading to 1,274 pence. Carlsberg, whose shares had fallen more than 10% since its approaches became public, was up as much as 4% in early trading in Copenhagen.
Carlsberg is seeking to expand beyond its traditional beer category, with sales of alcoholic beer no longer growing as consumers opt for zero-alcohol beer, soft drinks and alternatives such as hard seltzer.
Expanding in the UK through the acquisition of Britvic and the buyout of its brewing partnership with pub chain Marston’s Plc — a deal also announced Monday — consolidates Carlsberg’s presence in the country. It’s been seeking to expand in new markets after its Russian business was seized after the Ukraine invasion.
The initial share price reaction was a result of not being able to explain the deal to shareholders when it was first made public, said Carlsberg Chief Executive Officer Jacob Aarup-Andersen in an interview.
“We want to accelerate categories that have the highest possible growth,” he said. “That is premium beer, no alcohol beer, beyond beer and soft drinks. Therefore you will continue to see us expand.”
In markets where Carlsberg has combined with soft drinks, the company has higher margins, Aarup-Andersen added. Brands such as Somersby ciders and Garage hard seltzers account for 2% of its volumes. It intends to create a single drinks company in the UK called Carlsberg Britvic.
Britvic can trace its history back to the 1930s. Today, it’s a global organization with more than 35 brands, including J2O and Robinsons, sold in over 100 countries.
Analysts at Jefferies said it was a low-risk transaction with attractive financials.
Carlsberg’s renewed offer comes after PepsiCo, which has a bottling relationship with both firms, agreed to waive a change-of-control clause in its contract with Britvic that potentially could have allowed it to poison the deal.
The Britvic deal is one of the first big moves by Aarup-Andersen, a former Goldman Sachs banker who became CEO in September last year. Carlsberg suspended a planned share buyback Monday, but Aarup-Andersen said it expects to resume buybacks when leverage is reduced.
Overseas Bidders
Britvic is the latest UK-listed company to be targeted by overseas bidders, amid relatively cheap valuations in London.
Royal Mail owner International Distribution Services Plc, cybersecurity outfit Darktrace Plc, packaging giant DS Smith Plc and logistics business Wincanton Plc are among the companies to have been snapped up or to have accepted offers this year. Bids for Currys Plc, Direct Line Insurance Group Plc and Anglo American Plc were ultimately fended off by the target companies.
The MSCI UK index trades at a 40% discount to global peers based on forward price-to-earnings ratio.
--With assistance from Joel Leon and Michael Msika.
(Updates with share prices, chart and CEO comments.)
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