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Nick Train 'inclined' to support AG Barr-Britvic bid - but must be convinced

Nick Train 'inclined' to support AG Barr-Britvic bid - but must be convinced

AAA-rated Nick Train has said he is 'inclined' to support the AG Barr-Britvic merger, but still has to be fully convinced of the deal's benefits.

Train (pictured) counts Irn Bru and Tizer maker AG Barr among the top 10 holdings in his popular Lindsell Train Investment Trust and says it has been a 'wonderful' investment for the £50 million company.  He also holds the company in his Finsbury Growth & Income Trust.

However, Train says he will scrutinise closely the details of  the proposed merger, which according to reports was put forward by AG Barr even though it is a smaller company than rival soft drink maker Britvic.

'Barr has been a wonderful investment for your company. This is in part down to the inheritance of great brands that the company has nurtured, in some cases for over 100 years. In addition, Barr has been well-run,' Train said. 

'Generations of prudent and brand-focused board members have endowed the company with a canny, but entrepreneurial culture.  In recent years, too, there have been a number of shrewd and highly accretive acquisitions led by the current management team.'

But while AG Barr is often looked upon fondly by many of its investors, its latest bid has been met with some reticence. It was reportedly put forward by Roger White, AG Barr's chief executive, who is expected to take over the helm of the newly combined company from Britvic boss Paul Moody if the merger goes ahead.

White has steered the £516 million market cap drinks maker to strong profits, though gloomy weather over the summer months is expected to take its toll on margins when Barr next reports. 

Since White's plan was made public at the beginning of this month the fact he may have spearheaded it are among the few scant details to emerge.

According to analysts, Britvic, which has a market cap of around £880 million, will see its shareholders take on 63% of the new company. AG Barr investors will take on the remaining 37%.

Train, who does not hold any Britvic shares, says that at this stage there seems to be the potential for 'significant' cost savings and efficiencies within the new company, and that Barr's  previous record in terms of building and managing its brands makes him 'inclined to support' the merger.

But the manager said the fact he has steered clear of making an investment in Britvic is holding him back.

'We must also acknowledge to ourselves that, although we own circa 8% of Barr on behalf of our clients, we do not hold a single share in Britvic, despite it ostensibly offering access to an industry that we  very much like,' said Train.

'Our ambivalence toward Britvic, then, means that we will scrutinise the proposed deal with extra intensity.  We are open to being persuaded about its merits, but we do need to be persuaded of its merits.

'We're looking forward to meeting with Barr's team once full terms have been disclosed.'

Other holders of AG Barr include Caledonia Investments, which is one of the drinks maker's biggest shareholders, Standard Life Investments' Harry Nimmo, who runs both the open and closed-end versions of the Standard Life UK Smaller Companies funds, David Lindley's Montanaro UK Smaller Companies and Aberdeen's UK Smaller Companies.

Irn Bru, dubbed Scotland's 'second national drink' has been in existence almost as long as 115-year-old AG Barr, though newer brands in its stable include Rubicon. Both AG Barr and Britvic have grown their met profit margins by similar amounts this year. Investors are willing to pay more to invest in AG Barr though, with has a price-earnings ratio of roughly 18 versus Britvic's 14.5.

As an open-ended manager, Train has returned 70.4% versus 28.4% by his typical UK All Companies peer.  His closed-end Lindsell Train Investment Trust has grown its net asset value (NAV) per share 54.97%, versus 28.39% by the FTSE World Index.  Lindesll Train trades on a 7% premium to NAV.

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