Cott Corp., Tampa, Fla., announced that it has entered into a definitive agreement to sell its traditional beverage manufacturing business — Cott Beverages — to Refresco, the Netherlands, for $1.25 billion. The transaction includes Cott's North America, United Kingdom and Mexico businesses and excludes the RCI International division and its associated concentrate facility as well as the Aimia Foods division.
A leading manufacturer of a diverse mix of beverages for the retail trade and branded manufacturers, Cott Beverages is one of the world's largest producers of beverages on behalf of retailers, brand owners and distributors, producing various types of non-alcohol beverages in a variety of packaging formats and sizes, the company says.
In a statement, Jerry Fowden, Cott Corp. chief executive officer said: "After a thorough strategic review in 2013, we developed an accelerated diversification and acquisition strategy in order to transform our company and create a business weighted toward better-for-you products in categories with topline growth, a more diverse channel and customer base, higher margins and strong free cash flow generation. 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 Beverages generates approximately $1.7 billion in revenues and has a strong and experienced management team with longstanding customer relationships in North America and the United Kingdom. Subsequent to the closing of the transaction, Cott Beverages' leadership team will report to the Executive Board of Refresco, it says.
For Cott, the transaction is expected to improve top-line growth and stability, enhance overall gross profit and EBITDA margins, reduce net leverage, reduce customer concentration, reduce commodity exposure, and shift Cott’s core focus to growing categories, the company says.
"The sale of Cott's traditional business substantially accelerates our ability to deleverage the business and positions us well to grow our water, coffee, tea and filtration businesses both organically and through value accretive tuck-in acquisitions while also giving us the optionality to expand our platforms through larger scale acquisitions if and when the right value-enhancing opportunities present themselves,” Fowden said.
The acquisition of Cott Beverages and its bottling activities is a part of Refresco’s buy- and-build strategy to create the largest independent bottler for retailers and A-brands in Europe and North America, the company says. The transaction will provide Refresco with 19 production sites in the United States, four in Canada, one in Mexico and five in the United Kingdom, it adds.
“This transaction marks a step change in the industry that reinforces Refresco’s position as a leading independent bottler for retailers and A-brands,” said Hans Roelofs, chief executive officer of Refresco, in a statement. “Last year in September, we acquired Whitlock Packaging, marking our entrance into the North American market and the start of our second platform for growth. This is a truly transformational deal, right at the heart of our buy and build strategy. Being able to acquire Cott’s bottling activities is an opportunity we have been studying for the last decade, and today, having grown the company through many successful acquisitions, we have the size, track record and execution power to take this significant leap forward.
“The bottling activities of Cott are a perfect strategic fit to our current activities,” he continued. “With the acquisition we create nationwide coverage in the U.S., the largest single soft drinks market globally, while adding significant capacity and extending our broad product portfolio in the U.K. A total of 29 production sites, producing a volume of over 4 billion liters of products, will be added to our already extensive manufacturing footprint and upon completion, Refresco will produce approximately 12 billion liters for all leading retailers and A-brands. Combining these two great companies, we had high quality management, employees and assets to the Group, and we create a new industry leader with continued potential to further value creation. I am excited about the future ahead.”
The acquisition is expected to close in the second half of 2017. It is subject to certain closing conditions including regulatory approval, Refresco shareholder approval and working capital adjustments.
Barclays acted as financial advisor to Cott, while Drinker Biddle & Reath LLP acted as legal advisor. In addition, Cott turned to CMS for advice on Dutch law matters relating to the transaction.