The Britvic (LSE:BVIC) share price rocketed 11% higher at one point today (21 June). It meant the stock was up 27% over the past year, well above the FTSE 250 index average return. The move today comes on the back of some big news, which makes it a really interesting stock to consider now.
Saying no to another bid
The news out today was the rejection of a takeover bid from Carlsberg. The cash offer was 1,250p per share, which was 21% higher than where the stock closed yesterday. This was a second bid from the company, which had made a lower offer at the start of the month.
Time will tell whether Carlsberg makes another offer. But the news tells me a couple of really key investing points.
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One is that other businesses think Britvic is cheap right now at the current valuation. If this wasn’t the case, takeover bids wouldn’t be coming in at a premium to the current price. The second is that there’s clear long-term demand for Britvic’s products. The soft drinks firm owns 39 different brands, trading all around the world. If there wasn’t a clear vision ahead, again, there wouldn’t be as much interest in buying it.
What the rejection tells me
At the moment, several FTSE 250 and FTSE 100 companies are in the process of being bought. In fact, earlier this week I wrote about Hargreaves Lansdown. The FTSE 100 firm is likely to be acquired by a private equity group.
I didn’t see the value in investing there, simply because the deal looks pretty well done. There’s limited movement for the share price from here. However, this isn’t the case for Britvic.
The rally in the share price today, despite the offer being rejected, shows me that investors feel the company can thrive by itself. Yet it also shows me that the stock is potentially undervalued and that the stock is playing catch-up to get to a fair price.
True, a third and better offer might be coming further down the line. But I don’t see this as a massive risk. If I buy the stock now and no offer comes, I like the fundamentals of the business anyway. If an offer gets accepted, it’ll be at a premium to what I pay for it now, so I won’t lose money.
To be clear, I’m not buying the stock simply hoping for some quick profits from a deal. Rather, the rejected offer flags up to me that this is a business that a lot of people are interested in right now.
Bringing it all together
Britvic does come with risks. The 2023 results showed revenue up 6.6% versus 2022, but pre-tax profit fell to £156.8m from £175.1m the year before. This was blamed partly on the poor weather, which shows how the business can be negatively impacted by external factors.
On balance, I’m really interested in buying Britvic shares and am thinking about doing so imminently.
