Refresco to buy Cott’s bottling business in $1.25bn deal

Refresco has agreed to acquire Cott Corporation’s soft drinks business for $1.25 billion.

The move for Cott Beverages creates the largest independent bottler in Europe and North America with a combined production volume of approximately 12 billion litres. The business is profitable, Refresco said, with revenue of $1.7 billion in 2016 and pre-tax earnings of $136.5 million.

Refresco expects the deal to deliver synergies of around €47 million within three years of closing, which could be as soon as this quarter.

Refresco chief executive officer Hans Roelofs said: “We are excited to welcome Cott Beverages to the Refresco family. We have been focused on growing our platform in both North America and Europe and this transaction is a significant enhancement to our buy and build strategy which will provide Refresco with enlarged scale, synergies, and savings alongside Refresco’s manufacturing footprint, geographic diversity, product range and customer service.

“We will now have a well-balanced portfolio with exposure to all categories for retailers in North America and Europe in addition to a scale contract manufacturing footprint throughout these geographies from which to continue to grow both organically and by pursuing our buy and build strategy.”

Cott’s products span categories such as carbonates, energy drinks, bottled water and shelf-stable juices.

It is one of North America’s largest private-label producers of beverages on behalf of retailers, brand owners and distributors. It also operates brands such as Cott, Red Rain, Vess cola, Vintage Seltzer and Harvest Classic juice.

The company owns 19 production sites in the US, four in Canada, one in Mexico and five in the UK.

The deal will allow Refresco to significantly increase its access to the North American market, following its move for Whitlock Packaging a year ago.

The acquisition won’t affect Cott’s water delivery or coffee businesses, which will remain separate. They include DS Waters; Eden Springs, the European water delivery company acquired by Cott in June 2016; and S&D Coffee, which it bought for $355 million the following month.

Jerry Fowden, chief executive officer of Cott, added: “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 towards 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.”

Refresco will finance the acquisition using debt facilities and will issue €200 million in new shares within 12 months of completion in order to support the transaction.

Completion is expected during the second half of the year.