Refresco to Buy Cott Beverage Business for $1.25 Billion

(Bloomberg) -- Refresco Group NV 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 also plans to sell 200 million euros ($233 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 familiar with the matter said this month, after the company rejected a previous 1.4 billion-euro bid in April.

The acquisition is “the largest deal that we could have made in this industry,’’ Refresco Chief Executive Officer Hans Roelofs said in a telephone interview. 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 rumors and reports.”

Refresco dropped 3.3 percent to 16.60 euros in Amsterdam, valuing the company at about 1.35 billion euros. 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. Cott in 2014 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. Cott jumped 5.5 percent 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 Wal-Mart Stores Inc., 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,” 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 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 U.S. 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 U.S. footprint in one go.”

Refresco now will 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.

--With assistance from Sarah Syed

To contact the reporters on this story: Phil Serafino in Paris at pserafino@bloomberg.net, Joost Akkermans in Amsterdam at jakkermans@bloomberg.net, Cat Rutter Pooley in London at crutterpool1@bloomberg.net.

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net, Eric Pfanner, Thomas Mulier