Refresco Group agreed to buy the soda business of Canada’s Cott Corp. for $1.25 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 it also plans to sell €200 million ($233 million) of stock within a year to bolster its financial strength, the Rotterdam-based company said in a statement. Shareholders will vote on the transaction at a special meeting on 5 September, 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 that 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 familiar 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's chief executive officer, Hans Roelofs, said in a telephone interview.
The takeover wasn’t a response to PAI, Roelofs said. “[It’s a] very offensive step,’’ he said, “[and should be seen as] completely separate from all rumours and reports.”
Refresco dropped 3.3% 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, Ontario, the sale will accelerate the company’s shift away from soft drinks and toward water, coffee, tea and filtration. In 2014, Cott bought Atlanta-based DS Services of America, Inc. for $1.25 billion, becoming the biggest publicly traded water supplier to US homes and offices. Cott jumped 5.5% to C$19.45 in Toronto, giving the company a market value of C$2.7 billion ($2.2 billion).
Monster Drinks
Cott’s beverage-manufacturing business, with $1.7 billion in sales last year, produces private-label drinks for retailers including Walmart, does contract manufacturing for clients such as Monster Energy drinks, and makes products under its own brand. The sale includes Cott’s North American, UK and Mexican 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 will also 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,” CEO Jerry Fowden said.
Investment bankers at Barclays advised Cott, while Drinker Biddle & Reath LLP provided legal advice and CMS provided counsel on Dutch law matters. JPMorgan served as Refresco’s adviser on the acquisition, with KPMG providing financial and tax advice, and Nixon Peabody LLP and Allen & Overy LLP serving as legal counsels.
‘Acquisition Machine’
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 US with the $129 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 US footprint in one go.”
Refresco will now focus on integrating the Cott acquisition, meaning that no large deals should be expected in the next two years, Roelofs said in the interview. Talks with Cott began in October, and thus were already under way when the company announced in April that it had rejected a takeover bid from PAI, he said on a call with analysts.
News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.
