Pepsi agreement clears way for Britvic flotation

Britvic, the Tango-to-Robinsons soft drinks group, is set for a stock market flotation of up to £700m after co-owners InterContinental Hotels, Whitbread and Allied Domecq persuaded PepsiCo to back the move.

The decision ends more than two years of wrangling between the two sides after the US cola giant threatened not to extend its bottling agreement with Britvic in the event of a sale.

InterContinental, which announced the demerger alongside encouraging full-year results, said PepsiCo's change of heart had come after Britvic renewed a 15-year bottling agreement with the US group. PepsiCo also gets a 5 per cent stake in Britvic.

Under the terms agreed, Britvic must be floated between 2005 and the end of 2008 and can not be sold to either a trade buyer or a venture capitalist, in order to protect Pepsi from unwanted competition. As well as the Britvic brands, the soft drinks group has the exclusive rights to sell Pepsi and 7-Up in England, Scotland and Wales.

Richard North, the chief executive of InterContinental, which owns 47.5 per cent of Britvic, said floating the group would accelerate its own plans to return cash to shareholders. He said there was "no strategic rationale" for Britvic to belong to a hotels group. "With the re-negotiation of the Pepsi bottling agreement we took the opportunity to say we want out."

Whitbread and Allied Domecq each own 23.75 per cent of the soft drinks group.

Analysts estimated that InterContinental, which was demerged from Six Continents last Spring, could return up to £1.7bn to investors, including the £250m share buyback programme that the hotels group announced yesterday.

Separately, InterContinental joined rival Hilton in declaring an end to the toughest times for hoteliers in "living memory". Abandoning its previous caution, it said conditions were "improving steadily" with the exception of continental Europe. It reported a 5.4 per cent dip in last year's pre-tax profits to £244m, but said profits rose 11 per cent in the last three months of the year. Its shares slipped 5p to 518p.

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