Cott to sell soft-drink business for $1.56B
If approved, deal will make Dutch purchaser the largest independent pop bottler
Refresco Group NV agreed to buy the soda business of Canada’s Cott Corp. for $1.56 billion in a deal that may help the Dutch soft-drink bottler fend off an unsolicited takeover offer from a private-equity firm.
Refresco will pay for the deal with debt, and also plans to sell 200 million ($292 million) of stock within a year to bolster its financial strength, the Rotterdam-based company said in a statement Tuesday. Shareholders will vote on the transaction at a special meeting Sept. 5, the company said.
The purchase will create the largest independent bottler for retailers and consumer companies in Europe and North America, Refresco said.
It also means private equity firm PAI Partners SAS is unlikely to continue its pursuit of Refresco, said Robert Jan Vos, an analyst at ABN Amro. Paris-based PAI submitted a new offer for Refresco, people famil- iar with the matter said this month, after the company rejected a previous 1.4 billion bid in April.
The acquisition is “the largest deal that we could have made in this industry,” Refresco CEO Hans Roelofs said.
The takeover wasn’t a response to PAI, he said. It’s a “very offensive step,” he said, and should be seen “completely separate from all rumours and reports.” Refresco dropped 3.3 per cent to 16.60 in Amsterdam, valuing the company at about 1.35 billion. A representative for PAI wasn’t available to comment on Refresco.
For Cott, which is based in Mississauga, the sale will accelerate the company’s shift away from soft drinks and toward water, coffee, tea and filtration.
“After a thorough strategic review in 2013, we developed an accelerated diversification and acquisition strategy in order to transform our company,” Cott CEO Jerry Fowden said in a statement.
“This transaction is very much in line with this strategy, and enables our traditional business to become an integral part of a larger global beverage manufacturing company that pursues the same high customer service and quality standards Cott has been known for throughout its history.”
Cott in 2014 bought Atlanta-based DS Services of America Inc. for $1.56 billion to become the biggest publicly traded water supplier to U.S. homes and offices.
Cott’s beverage manufacturing business, with $1.7 billion in sales last year, produces private-label drinks for retailers including Wal-Mart, does contract manufacturing for clients such as Monster Energy drinks and makes products under its own brand.
The sale includes Cott’s North America, U.K. and Mexico operations, the company said in a separate statement. It doesn’t include the RC Cola brand and related operations.
The sale will allow the company to repay some borrowings, reducing its net debt to less than 3.56 times adjusted profit, Cott said. The company also will pursue small acquisitions in water, coffee, tea and filtration, as well as “larger-scale acquisitions if and when the right value-enhancing opportunities present themselves,” Fowden said.
Refresco, founded in 1999, went public in an initial public offering in 2015, and Roelofs described the company at that time as an “acquisition machine.”
The purchase comes a year after Refresco expanded into the U.S. with the $161-million acquisition of bottler Whitlock Packaging.
“This is a very big next step,” said Vos, the ABN Amro analyst, who recommends buying Refresco shares. “They have solved the U.S. footprint in one go.”