AG BARR has continued its drive away from its core Irn-Bru products, announcing plans to buy fruit drinks company Rubicon for about £61 million.
Unveiling the largest acquisition in the company's 133-year history, Barr said the deal would improve both its products portfolio and geographic diversity, with most of Rubicon's sales derived in London and the south-east of England, where Barr is a
t its weakest.
London-based Rubicon has built a business selling exotic fruit products, such as mango, guava, papaya and lychee flavoured drinks.
It made an operating profit of £4.7m on sales of £27m in 2007. Barr said yesterday it had identified savings of £1.5m a year, mainly from improved purchasing power.
Chief executive Roger White said: "The existing growth momentum of the Rubicon brand in the exotic juice drinks sector and the potential to build on this through its combination with Barr is an exciting prospect.
"The acquisition is in line with our core strategy of developing our portfolio and increasing the scale of our business through differentiated quality brands. At the same time it strengthens our position in the growing juice drinks category."
Yesterday's announcement is the latest in a string of acquisitions for the company diversifying it away from sweetened fizzy drinks, which began in earnest in 2006 with the £15m purchase of water company Strathmore.
Since then the company has bought brands in the sports drinks, vitamin-infused water and energy drinks markets.
Analysts at Brewin Dolphin said the deal took Barr "firmly into the still and juice category", which represents almost 13 per cent of the market.
White said the latest deal was aimed at diversifying the company's portfolio but denied it was a conscious effort to move away from carbonated soft drinks, previously its core business.
"This is just a good brand in a good sector," White said yesterday of Rubicon. "We like things that have the ability to grow and that have good solid brands and it just so happens that it's largely at the still end of the market."
White said Barr had been interested in buying Rubicon for "quite a long time" and had been in formal negotiations for many months before the deal was announced.
While the immediate focus will be on integration of the new business, White said Barr would not be afraid to do more deals to expand.
"Organic growth is good but where we can complement that with new products we will still consider acquiring."
Because of the size of the deal – more than a quarter of Barr's current market capitalisation – the company will need the formal approval of its shareholders at an extraordinary general meeting.
Analysts praised the proposed deal, with Altium Securities predicting the deal would boost 2010 profits by £1.3m to £25m.
Previously sitting on a large cash pile, the enlarged business will now have net debt of about £35m, with the company arranging a new £70m debt facility with Royal Bank of Scotland.
Shares in AG Barr rose 15p to 1,160p yesterday.
Fruitful move into niche territoryRUBICON'S founders named the company after the Italian river crossed by Julius Caesar in 49 BC – plunging the Roman republic into civil war – because they wanted to start a similar revolution in soft drinks.
AG Barr's plans to buy the company smack of prudence over risk, pushing the iconic Scottish company into a new category, geography and customer base.
Since 1981, Rubicon has carved a niche in the fruit drinks business in the south of England, mainly aimed at the Asian community.
Initially sold almost exclusively in convenience stores, its products are increasingly found on the shelves of supermarkets, with larger retailers now accounting for almost a fifth of sales.
Headquartered in Wembley, North London, Rubicon has nearly 100 staff, and has a factory in Gwent in Wales. For the past two decades it has out-sourced the manufacturing of its fizzy drinks to AG Barr. Its products are branded almost exclusively under its own brand and it has no famous or ubiquitous product of the likes of Irn-Bru. The company reported a £4.7 million operating profit last year.
The full article contains 705 words and appears in The Scotsman newspaper.
