Comment - Jones Soda – The road ahead

By | 28 July 2010

Jones Soda has courted a number of buyers in the last 12 months

Jones Soda has courted a number of buyers in the last 12 months

News that Jones Soda has called off the search for a buyer sent its shares tumbling almost 10% yesterday (27 July).

The US soda firm has courted a number of buyers in the last 12 months as it has struggled to bring itself back from the brink – the firm has not posted a profit since the quarter ended June 2007.

In April this year, Jones reported losses of US$10.5m for 2009 and sales down by 28% for the year, compared with 2008.

And, while the company has maintained that it has had several options open to it, such as share offerings, debt refinancing and strategic partnerships with third parties, we’ve been waiting for Jones to come up with something since late-2009.

Back in March, the industry was certain Reed's would acquire its fellow US-based soft drinks group in a share and cash merger deal. Yet the wheels fell off the deal when Jones announced it was in talks with an unnamed rival “third party” over a merger, or even an out-and-out takeover.

The company also received an acquisition offer from Big Red Holdings Corp in December last year, but according to Jones, the offer just wasn’t tasty enough.

CEO Bill Meissner told Reuters this week that the firm has now shifted its focus from trying to sell the business to building its brands through an expansion of its distribution network.

Meissner told the news service that the first two bids “were not an appropriate value”, while the third came with conditions that "made it a risk at best” for shareholders.

The CEO said his focus now is on “steering the company out of trouble”, while remaining independent.

So what of the road ahead for Jones?

Meissner is certainly optimistic, given the company’s poor earnings results to date. But, maybe Jones’ deal with Walmart back in May, which will see the beverage firm's products appear in the US retailer’s stores, is more of what is needed for the struggling firm.

Only this month, Jones announced that it is to raise around US$1.1m in a private stock sale that it intends to use for new marketing programmes, securing and growing larger distributor and national retail accounts, and for working capital.

The company also secured access to up to $10m in extra funds last month, after signing an equity financing deal with Glengrove Small Cap Value.

Maybe all is not lost just yet. If Jones was really desperate to sell, it would probably be owned by one of its three suitors by now.

And, while shares dropped 9.52% or $0.12 to $1.14 at close of trading yesterday, it is clear that Jones’ determination to ride out the storm alone now is its main priority.

While this may prove a risky path for the soda maker, given the murky soft drinks market in the US, the next 12 months for the firm will be crucial.

Sectors: Mergers & acquisitions, Soft drinks, Water

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