LONDON -- Britvic (ISE: BVIC.L) rallied 37 pence, or 11%, to 367 pence in early trade this morning after the soft-drinks group confirmed it was in merger discussions with AG Barr (ISE: BAG.L) . The shares of AG Barr gained 12 pence, or 3%, to 428 pence.
Through a joint statement, Britvic and AG Barr claimed a merger would create "one of the leading soft-drinks companies in Europe, with a strong portfolio of market-leading brands."
They added: "The combination would have compelling industrial logic and represents an opportunity for both companies to enhance their industry position, and achieve significant synergies and shareholder value."
Though Britvic and AG Barr confirmed discussions were at an early stage, they have already agreed that Roger White, currently chief executive of AG Barr, would become chief executive of the enlarged group, while John Gibney, presently chief financial officer of Britvic, would become chief financial officer.
In addition, the groups have said any deal would be an all-share merger, with Britvic owning 63% and AG Barr owning 37% of the combined group's share capital.
Any merger deal could be seen as opportunistic for Barr. After peaking at 518 pence during 2010, Britvic's shares have since underperformed after the firm's 2011 earnings fell 8% and subsequent interim earnings dropped 10%. Problems cited included the wet summer weather and a recall of Fruit Shoot drinks.
AG Barr, which is best known for its Irn-Bru brand, has in contrast been a dependable performer during the banking crash and recession. Between 2007 and 2012, AG Barr's earnings have risen steadily from 11 pence to 24 pence per share while the dividend has advanced from 5.3 pence to 8.7 pence per share.
However, AG Barr's boss, Roger White, may be tested running a much larger company. AG Barr's profits were 34 million pounds for 2012, while Britvic's came in above 100 million pounds.
For today at least, the soft-drinks sector has rewarded investors with handsome gains. Perhaps a combined Britvic and AG Barr can provide healthy gains in the long term, too.
If you are looking for long-term share ideas, this complimentary report -- "The Market's Top Sectors" -- highlights three industries with favorable prospects for 2012 and beyond. The special report, which can be downloaded today, also pinpoints particular shares from each sector worthy of your further research.
Are you looking to profit from this uncertain economy? "10 Steps to Making a Million in the Market" is the very latest Motley Fool guide to help Britain invest. Better. We urge you to read the report today -- it's free.
Further Motley Fool investment opportunities:
The article Britvic Rallies 11% on Merger Hopes originally appeared on Fool.com.
Maynard Paton does not own any share mentioned in this article.The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.