Analysis - Cott Corp searches for stability, but sale seems off-limits
Cott Corp may not have as many options available as it would like
With Cott Corp admitting this week that it is considering its options, one could be forgiven for concluding that the firm is desperate to find some calm at last.
It was only about two years ago that the lay of the land for Cott suggested a bright future for the company. “[Cott] is positioned to benefit from customer cross-selling opportunities, increased negotiating power with customers and better purchasing power with suppliers,” one analyst was quoted as saying in August, 2011.
Since then, however, Cott has been on a rollercoaster ride: Full-year profits in 2011 tumbled by almost a third, then leapt by almost the same degree in 2012.
With nine-month profits last year coming in 34% down, it's clear the rollercoaster ride continues.
All options are on the table, Cott said yesterday, ranging from those that “would either complement its strategy of organic growth and growth through diversification or otherwise enhance shareholder value”. In plain English, that means ranging from making purchases to selling up altogether.
The latter looks highly unlikely, according to one analyst this morning. “Financial buyers have long had the opportunity to emerge and have not bid - presumably on concerns about category dynamics, margin structure, customer concentration,” says Mark Swartzberg at Stifel. “And, strategic prospects have shown a preference for not competing against Coke and Pepsi.”
Buying your way out of trouble carries a whole different set of risks, and that's a set that shareholders may struggle to stomach.
It appears then, that Cott's advisers are going to be earning their money in the weeks and months ahead.
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