Cantrell & Cochrane (C&C) and British drinks group HP Bulmer have one thing in common - they both manufacture and distribute Bulmers Cider, with C&C having rights to the brand in Ireland, while Bulmer has rights to the brand elsewhere.
Bulmers has been one of the stars of C&C's Irish drinks portfolio and has become established in the on-sales and off-sales markets. The same brand under HP Bulmer management has had a difficult time in the past year and certainly has gone nowhere near establishing itself as a premium brand as has happened in Ireland, where Bulmers is apparently classified as a LAD (long alcoholic drink), in the same category as lager.
HP Bulmer - worth £250 million sterling (€413 million) - needs a kick to get into the market capitalisation range where it would registers on international fund managers' radar screens. C&C will, in the next year or so, be looking for an exit for its financial backers and the indications are that a flotation of C&C is not a runner, with the group considering trade sales and mergers with other groups.
Some analysts have privately suggested to Current Account that a merger between C&C and HP Bulmer has considerable logic and could even be structured through a reverse takeover that would give C&C and Bulmer shareholders a stock market listing for the merged company's shares. It is hard to see C&C, however, getting into bed with Bulmer while the British group is trading on a racy forward earnings multiple of more than 12.
Reaction in the UK media to the recent Bulmer half-year results was mixed, with the company being slapped with buy, hold and sell recommendations. The shares fell this week and if they weaken much further towards their 2000 low of £3.68, they would reach the sort of multiples where an approach by C&C could be justified.
Tony O'Brien has said he could spend £300 million on an acquisition, absorb it and then go to the market as a bigger company and raise a bundle of cash to pay off the debt. Reversing into Bulmer could fulfil some of those aims, with the added attraction of an instant stock market listing and the resulting access to equity capital.
