In a joint statement, the firms admitted taking part in “preliminary discussions which may or may not result in an all share merger of AG Barr and Britvic”.
If a merger did take place it would “create one of the leading soft drinks companies in Europe, with a strong portfolio of market leading brands", they said.
“The combination would have compelling industrial logic and represents an opportunity for both companies to enhance their industry position, and achieve significant synergies and shareholder value.”
The statement revealed that agreement had been reached already “with respect to certain key aspects of the merger”.
It was agreed that Britvic shareholders would own 63% and AG Barr shareholders 37% of the enlarged group's share capital.
'Irn Bru gets you through'
Panmure Gordon analysts Damian McNeela and Graham Jones said: "Many people would have been forgiven for not expecting Irn-Bru's new marketing strap line 'Irn-Bru gets you through' to have been applicable to Britvic's share price.
"Our initial reaction is that the deal is more attractive for Britvic shareholders than for AG Barr shareholders. We move our Britvic recommendation from Sell to Hold and increase our target price from 250p to 380p. We maintain our Hold recommendation on AG Barr but raise our target price to 440p (400p).”