TORONTO, ON and TAMPA, FL–(Aug 2, 2016) – Cott Corporation (
The Eden acquisition is consistent with Cott's stated diversification strategy to expand in HOD water, coffee and tea services as well as filtration services where its platform, operating strength and potential synergies can be leveraged. Eden is a scale business that generated over EUR 360 million in pro forma revenues during 2015. The acquisition broadens the distribution platform of Cott's existing UK/European business by providing access to a direct-to-consumer route distribution platform in Europe serving over 800,000 homes and offices. In line with Cott's strategy, the acquisition is expected to be accretive to adjusted free cash flows in its first full year and provide a cash on cash IRR above its cost of equity.
"The Eden acquisition further accelerates Cott's diversification and is another great step in our stated strategy to pursue opportunities in the higher margin home and office water delivery, coffee, tea and filtration categories where we believe we can leverage our platform and operating strength to drive synergies and build shareholder value," commented Jerry Fowden, Cott's Chief Executive Officer.
Tom Harrington, DS Services CEO, will continue in that capacity at DS Services, and will also oversee Eden Springs, which will assist in fully leveraging best practices, procurement scale, back office processes and synergies across Cott's HOD businesses.
Tom Harrington commented, "We are very excited about expanding our platform into the European market. We firmly believe that our combined businesses will create an even stronger, cash generating, growth and service oriented platform across North America and Europe. In addition, these platforms not only provide opportunity for organic growth but we also expect to capitalize on Eden's and DS Services' combined scale in procurement and expertise in follow on tuck-in acquisitions."
Raanan Zilberman, Eden's CEO, commented, "We are excited to join the Cott family. The transaction is an important step as we strengthen our international capacity and enhance our market-leading position. Furthermore, we believe that the transaction will enable the expansion of our portfolio and services, and will provide increased opportunities for our employees and customers alike."
The purchase price is approximately EUR 470 million, on a debt and cash free basis, representing a mid 7x Eden's estimated adjusted 2016 run rate EBITDA of over EUR 60 million (mid 6x multiple including estimated run-rate synergies of approximately EUR 10 million). Cott financed the transaction through a combination of cash on hand and the private placement of EUR 450 million in aggregate principal amount of 5.50% senior notes due January 1, 2024. As a part of Cott's second quarter 2016 earnings release, Cott will announce a date for a separate modeling call which will include additional financial information.
ABOUT COTT CORPORATION
With the acquisitions of DS Services of America, Inc. and Eden Springs, Cott has combined leading providers in the direct-to-consumer beverage services industry with its traditional business, one of the world's largest producers of beverages on behalf of retailers, brand owners and distributors. Cott now has the largest volume-based national presence in the North American and European home and office delivery industry for bottled water and one of the five largest national market share positions in the U.S. and Europe office coffee services and filtration services industries. Cott reaches over 2.3 million customers through routes located across North America, Europe, Israel and Russia supported by national sales and distribution facilities, and fleet. Cott's broad portfolio allows it to offer, on a direct-to-consumer basis, a variety of bottled water, coffee, brewed tea, water dispensers, coffee and tea brewers and filtration equipment. Cott believes it has the broadest distribution network in the direct-to-consumer beverage services industry in North America and Europe, which enables it to efficiently service residences and small and medium size businesses, as well as national corporations, universities and government agencies.
To supplement its reporting of financial measures determined in accordance with GAAP, Cott utilizes certain non-GAAP financial measures, including 2016 estimated Eden Springs adjusted EBITDA, to separate the impact of certain items from the underlying Eden Springs business. Management believes this supplemental information is useful to investors for their independent evaluation and understanding of the transaction with Eden Springs.
Additionally, Cott supplements its reporting of net cash provided by (used in) operating activities determined in accordance with GAAP by excluding capital expenditures and acquisition, integration and transaction costs to present adjusted free cash flow (on a stand-alone and pro forma basis), which management believes provides useful information to investors about the amount of cash generated by the business that, after the acquisition of property and equipment, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, paying dividends, and strengthening the balance sheet. With respect to our expectations of performance of Eden as it is being integrated, reconciliations of adjusted free cash flow accretion are not available, as we are unable to quantify certain amounts that would be required to be included in the relevant GAAP measures without unreasonable effort. We expect that the unavailable reconciling items, which primarily include foreign exchange impact and phasing of capex, could significantly affect our financial results. These items depend on highly variable factors and any such reconciliations would imply a degree of precision that would be confusing or misleading to investors. We expect the variability of these factors to have a significant, and potentially unpredictable, impact on our future GAAP financial results.
The non-GAAP financial measures described above are in addition to, and not meant to be considered superior to, or a substitute for, Cott's financial statements prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this earnings announcement reflect management's judgment of particular items, and may be different from, and therefore may not be comparable to, similarly titled measures reported by other companies.
Safe Harbor Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 conveying management's expectations as to the future based on plans, estimates and projections at the time Cott makes the statements. Forward-looking statements involve inherent risks and uncertainties and Cott cautions you that a number of important factors could cause actual results to differ materially from those contained in any such forward-looking statement. The forward-looking statements contained in this press release include, but are not limited to, statements related to expected synergies and contribution to Cott's performance, and the potential impact the acquisition will have on Cott and related matters. The forward-looking statements are based on assumptions regarding the time necessary to satisfy the conditions to the closing of the transaction and management's current plans and estimates. Management believes these assumptions to be reasonable but there is no assurance that they will prove to be accurate.
Factors that could cause actual results to differ materially from those described in this press release include, among others: changes in estimates of future earnings and cash flows; expected synergies and cost savings are not achieved or achieved at a slower pace than expected; integration problems, delays or other related costs; retention of customers and suppliers; and unanticipated changes in laws, regulations, or other industry standards affecting the companies.
The foregoing list of factors is not exhaustive. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. Readers are urged to carefully review and consider the various disclosures, including but not limited to risk factors contained in Cott's Annual Report on Form 10-K and its quarterly reports on Form 10-Q, as well as other filings with the securities commissions. Cott does not undertake to update or revise any of these statements in light of new information or future events, except as expressly required by applicable law.