Comment - Cott Corp's Cliffstar buy a win-win deal

Most popular

Why COVID-19 has restored plastic's popularity

Remy Cointreau Performance Trends 2016-2020

COVID-19 a double-edged sword for CBD

Brown-Forman Performance Trends 2016-2020 - data

How drinks companies can trump the water fountain


The announcement that Cott Corp has made a move on Cliffstar will see the merger of the largest private-label soft drink maker in North America with the biggest global private-label juice company.


Described as a “major event” in the history of Cott by Stifel analysts, the acquisition certainly seems to be a win-win deal that will transform the generic pop company and almost double its size.

Cott announced yesterday that it will purchase the privately-held juice maker for US$500m.

The firm will also pay $14m to Cliffstar in deferred consideration over a three-year period, while also offering the company an "additional contingent earnout consideration" of up to $55m, dependent on its performance up to the end of this year.

Cott subsequently expects a cash tax benefit from the transaction in the region of $75m.

The deal price, according to Stifel analysts Mark Swartzberg and Mark Astrachan, is around 69% of Cott’s current enterprise value and a strategic positive.

“In our view, it diversifies Cott’s cash flows into a more stable category than carbonated soft drinks (CSDs) while also providing today’s Cott and today’s Cliffstar with the opportunity for meaningful cost synergies and revenue synergies,” the analysts noted.

Indeed, selling soft drinks into Cliffstar accounts not yet penetrated by Cott Corp and vice versa, is no doubt a win-win situation for both firms.

Combined with Cliffstar, Cott will undoubtedly be a more diversified company. The merge will allow Cott to strengthen its position in private label beverages.

Cliffstar has a lot to offer. Based in New York, the privately-held juice maker operates 11 facilities in the US, including five bottling and distribution operations, three fruit processing facilities, two fruit receiving stations and one storage facility. It employs around 1,200 staff.

A family-owned business, the company has been seeking buyers since 2009, according to press reports.

The Wall Street Journal wrote in December: “Closely-held Cliffstar has annual earnings around $75m and is seeking seven to eight times earnings, which would put a sales price at $500m to $600m.”

It seems the sale process hit a lull after some bidders backed off over price concerns and the long-term future for fruit-juice sales.

Cott, a major supplier of retailer brand CSDs, was clearly not put off and offered at the bottom end of Cliffstar’s expectations.

Analysts are confident the transaction is ultimately a win for shareholders.

“Preliminarily, we estimate the transaction implies pro forma fair value of $6.69 per share or higher, or an attractive risk/reward if integration risk is small,” Swartzberg and Astrachan noted.

The analysts remained with a ‘hold’ recommendation.

Yesterday, Cott also estimated consolidated sales of $426m and operating income of $37m for the three-month period, with volumes to come in at 207m cases.

This followed the firm’s swing to full-year profits in April. At the time the company said it hoped to win more new business in 2010. And indeed it has done.

Related Content

Hard seltzer movement is here to stay - GlobalData comment

Hard seltzer movement is here to stay - GlobalData comment...

Speyside Distillers China deal includes

Speyside Distillers China deal includes "option to invest" for Luzhou Laojiao - TFWA Asia-Pacific...

Refresco prepares for Cott Beverages purchase with H1 2017 sales jump - results

Refresco prepares for Cott Beverages purchase with H1 2017 sales jump - results...

Heritage and heft won't win hard seltzer's summer showdown - comment

Heritage and heft won't win hard seltzer's summer showdown - comment...

Oops! This article is copy protected.

Why can’t I copy the text on this page?

The ability to copy articles is specially reserved for people who are part of a group membership.

How do I become a group member?

To find out how you and your team can copy and share articles and save money as part of a group membership call Sean Clinton on
+44 (0)1527 573 736 or complete this form..

Forgot your password?