C&C could make ideal acquisition target for larger rivals, says analyst

Irish drinks group C&C would make an ideal acquisition target for larger international rivals SABMiller or Carlsberg, according to London industry analyst Phil Carroll of Shore Capital.

In a note issued yesterday in advance of C&C’s annual results today, broker Shore Capital predicted that an expected €106m pre-tax profit, delivering around 16% year-on-year growth, coupled with a growing demand for C&C’s cider and other drinks in overseas markets, might entice bids for C&C, whose global brands include Magners cider and Tennent’s lager. The Shore Capital note also cited industry reports of specific interest from both SABMiller and Carlsberg.

Mr Carroll said: “This comes as no surprise to us, given the structural growth that the premium cider market has been showing outside of Ireland, and we have long believed C&C to be a potential bid candidate.”

In contrast with this broker level speculation, C&C has itself been expanding in recent times, including the €20m acquisition of the Hornsby’s cider brand in the US late last year. C&C was expected to take commercial management of Hornsby’s in April, following its acquisition by R&J Gallo Winery last November. Details of this progress are also expected to roll out with today’s unveiling of 2011 results.

The Shore Capital analysis is based on a strong share price for C&C, which peaked at €3.94 in January, but has consistently stayed above €3.60 per share, with the lowest value being around €2.70 per share in January.

Shore Capital is predicting that C&C will today issue a strong global set of results for 2011, with evidence of solid management in the Ireland market. This, the broker feels, could attract bidder interest.

Mr Carroll said: “We anticipate Magners to be in growth in the UK from both a revenue and a volume perspective, following on from a strong Q3 performance. We expect profitability in the Republic of Ireland to have declined slightly, but for the operating margin to show significant improvement on the prior year.”

Mr Carroll expects C&C to deliver improved brand equity in its key products. He predicts respective revenues will have fallen in 2011, but predicts divisional margins and profitability will have improved.