Cott Corp., Missauga, Ont., has announced it intends to sell its traditional beverage manufacturing business for $1.25 billion to Refresco Group NV, a Netherlands-based drinks bottler. Cott said it will retain its water, coffee, tea and filtration service business — categories aligned with health and wellness trends and forecast to grow at a low single-digit rate. Refresco will pay for the deal with debt, and also plans to sell 200 million euros ($233 million) of stock within a year to bolster its financial strength, the Rotterdam-based company stated July 25. Shareholders will vote on the move Sept. 5, Refresco said.
The sale includes Cott’s North America, U.K. and Mexico operations, the company stated. It doesn’t include the RC Cola brand and related operations.
According to Refresco, its purchase will create the largest independent bottler for retailers and consumer companies in Europe and North America. It also means private equity firm PAI Partners SAS is unlikely to continue its pursuit of Refresco, analysts claim. The acquisition is "the largest deal we could have made in this industry," noted Refresco CEO Hans Roelofs.
For Cott, the sale will accelerate its shift away from soft drinks toward water, coffee, tea and filtration, Bloomberg reports. In 2014, it bought Atlanta-based DS Services of America Inc. for $1.25 billion to become the biggest publicly traded water supplier to U.S. homes and offices. Bloomberg says Cott’s beverage manufacturing business had $1.7 billion in sales last year. It produces private-label drinks for retailers including Wal-Mart Stores Inc., contract manufacturers for clients such as Monster Energy drinks and makes products under its own brand.
The sale will allow the company to repay some debt, 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," Cott CEO Jerry Fowden pointed out.
Refresco says it now will focus on integrating the Cott acquisition, meaning that no large deals should be expected in the next two years, according to Roelofs. Talks with Cott began in October, and were already under way when the company announced in April it had rejected a takeover bid from PAI, Roelofs told analysts.