The Competition Authority has given its final approval for Guinness Ireland's £33 million acquisition of the 70 per cent of United Beverages Holdings it does not own. The deal follows Guinness's agreement last week to sell its 49.6 per cent stake in Cantrell & Cochrane for £270 million, one of the conditions the authority attached to the UBH takeover.
Now that the deal has been given the go-ahead despite the opposition of rival drinks groups such as Murphys and Irish Distillers Guinness will pay £12.9 million for James Crean's 27.9 per cent stake in UBH, £8.6 million for Fyffes' 18.5 per cent and £11 million for the remaining shares controlled by the Byrne and Corcoran families.
The acquisition values UBH at £48 million. The group, which has net assets of £29 million, had sales of £80 million, pre-tax profits of £5.5 million and net profits of £4.3 million last year. UBH was formed in 1989 from the merger of a number of small drinks companies including Savage Smyth, Byrnes and Corcorans.
A spokesman for Guinness welcomed the decision by the Competition Authority and emphasised the authority had concluded that the takeover would not damage consumer interests, despite the objections lodged by other drinks groups.
While the full Competition Authority ruling will only become available today, the net effect of the ruling is to give Guinness 100 per cent ownership of the first and third biggest drinks distribution companies in the State. UBH is the biggest distributor while the combination of Deasy in Cork and Connacht Mineral Water in Galway both owned by Guinness is the third biggest. Cantrell & Cochrane now wholly-owned by Allied Domecq is the second largest distributor.
It is understood the authority found the merger of UBH with Deasy and Connacht Mineral Water would create very little extra concentration in the soft drinks market, but that it could increase competition by improving the ability of UBH to compete with C&C and Coca-Cola.
The authority also concluded that 68 per cent of the beer wholesaling market would be outside Guinness control after the merger and that the takeover would allow Guinness customers in the licensed trade to reduce their transaction costs.
The addition of UBH fills a big geographical gap in Guinness's beer and soft drinks distribution business, but the acquisition is expensive at 12 times after-tax profits. Industry sources believe this reflects Guinness's determination to ensure its bid was accepted by the various UBH shareholders.
UBH's main soft-drinks brand is Finches, but it also distributes Cadet, Corcorans and Splash as well as Becks imported German beer, Stonehouse cider and the Woodies alcopop drinks. It is estimated to have about 27 per cent of the packaged beer market.
