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Cott eyes acquisitions after selling off legacy soda business

July 25, 2017
  • Canadian company completes shift toward water, coffe and tea
  • Will first buy small companies while reducig debt levels

With the sale of its legacy soft drink business to Refresco Group NV, Canadian beverage company Cott Corp. completed a shift toward health-conscious consumers that it said could be followed by a large acquisition in a few years.

Mississauga, Ontario-based Cott will now focus on water, coffee, tea and filtration and buy small companies while reducing its debt levels, Chief Executive Officer Jerry Fowden said on a conference call Tuesday. The plan is to quickly bring down debt to 3 times adjusted net profit, from about 3.5 times after the sale.

“There are some larger transactions that we think have a very complementary fit with our business,” Fowden said. “We don’t think any of those are particularly pressing or available within the immediate next 12, 24 months but we do believe as we look out over the next three or four years, some of those opportunities might come to bear.”

Shares rose as much as 9.7 percent after the announcement, and we up 6.9 percent to C$19.70 at 12:23 p.m. in Toronto, helping the stock gain 30 percent this year.

The 2014 purchase of the Atlanta-based DS Services of America Inc. for $1.25 billion has already made Cott the biggest publicly traded water supplier to U.S. homes and offices. After today’s deal, the company expects to see revenue increase 2 percent to 3 percent a year, driven by a more diverse set of customers in a growing market.

Cott walks away from a business going back to the 1950s, when founder Henry Pencer started importing Cott sodas into Canada and began bottling beverages in Quebec three years later. It later used its soft-drink manufacturing lines to make sparkling and flavored waters, energy drinks and sparkling teas.

Cott will repay “roughly” $1 billion of debt with proceeds from the sale, according to Chief Financial Officer Jay Wells. That includes redeeming all $525 million of its 5.375 percent notes maturing in 2022 and $250 million of 10 percent notes due 2021 issued by DS Services, as well as paying off an asset-based lending facility.

https://bloom.bg/2tAtJTC

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