Britvic and AG Barr's £1.5bn tie-up has suffered a huge setback after the deal was referred to the Competition Commission for an in-depth investigation.
Shares in Britvic dived nearly 9 per cent while AG Barr shed 7 per cent after the Office of Fair Trading warned competition would be reduced between "certain brands" of the two suppliers.
The companies said the merger has lapsed as a result, even though shareholders had approved it, and Britvic's chairman, Gerald Corbett, said the deal was now "in the long grass" for at least nine months. Britvic also said its chief executive, Paul Moody, would be replaced immediately by Simon Litherland.
The regulator said it could not rule out the possibility that the enlarged company would raise prices following a merger.
Britvic's brands include Robinsons, Fruit Shoot, R Whites and Tango, while AG Barr makes Irn Bru, Tizer and Rubicon.
Amelia Fletcher, the OFT's chief economist, said: "The soft drinks industry is an important one for many consumers in Great Britain. People spend over £9bn each year on these drinks.
'This merger will see the UK market reduce from three to two main players. Our investigation has identified competition concerns relating to this deal with respect to Barr's Irn Bru and Orangina brands which could lead to higher prices for consumers." The Competition Commission expects to report on the deal by the end of July.Reuse content