A clause in Coca-Cola Amatil's takeover deal with Australian water cooler distribution firm Palm Springs looks to have blocked the chances of a rival bid from local water producer Refresh Group.

Refresh yesterday (8 August) asked Palm Springs to allow it to conduct due diligence on the company before deciding whether to table a rival offer.

Last month, the loss-making Palm Springs approached Coca-Cola Amatil and asked it to make a bid for the company, Australia's second-largest HOD (home and office water delivery) producer.

The two companies agreed on a A$7.4m (US$5.7m) deal that is set to be sealed within three months. The agreement also granted Coke Amatil exclusivity on the takeover, a clause that looks to have blocked Refresh's desire to look at Palm Springs' books.

"This agreement has an exclusivity clause, that amongst other things, prevents Palm Springs from soliciting or providing information that would lead to a third-party proposal," Palm Springs said. "It covers the request from RGL and accordingly Palm Springs cannot accede to it."

Palm Springs said it had considered "many alternatives" before striking the agreement with Coke Amatil subsidiary Neverfail Springwater. Among the proposals was a merger with Refresh but Palm Spring said it rejected the plan.

The company said it "could not see that the combination of the two businesses would do much to shore up the long term financial viability" of Palm Springs.

"Refresh Group turns over approximately A$3.5m with the bulk of its business base in Western Australia, where Palm Springs has no presence," Palm Springs said.

Nevertheless, it added: "The Palm Springs Board will obviously consider any bona fide business or share offer put before it."