July 07, 2010 16:45 ET
Cott Corporation Announces Business Combination With Cliffstar Corporation
TORONTO and TAMPA, FL--(Marketwire - July 7, 2010) - Cott Corporation (NYSE: COT) (TSX: BCB)
-- Combines the #1 private label carbonated soft drink and #1 private
label juice manufacturers
-- Creates a larger, more balanced business for Cott with a diversified
and complementary portfolio
-- Attractive purchase multiple of 4.9x Adjusted EBITDA (inclusive of tax
benefits and based on pro forma run-rate cost synergies)
-- Transaction is expected to be accretive on a cash basis in 2011
Cott Corporation (NYSE: COT) (TSX: BCB) announced today that it has signed
a definitive agreement to acquire privately-held Cliffstar Corporation, the
leading private label manufacturer of shelf stable juices, for cash
consideration of $500 million, payable at closing, and subject to
adjustments for working capital and other items.
In addition to the $500 million due at signing, Cliffstar is entitled to
$14 million of deferred consideration, which will be paid over a three-year
period. Cliffstar is also entitled to additional contingent earnout
consideration of up to a maximum of $55 million, based upon the achievement
of certain performance measures during the fiscal year ending January 1,
2011 as well as the successful completion of certain expansion projects in
2010. Cott expects to receive a significant cash tax benefit generated
from the deduction of the step-up in tax basis resulting from the
acquisition of Cliffstar's assets. The net present value of this cash tax
benefit is estimated to be approximately $75 million. The closing of the
transaction is subject to receipt of financing and other customary
conditions, including receipt of required regulatory approvals.
"As the clear leader in private label shelf-stable juice, Cliffstar is an
ideal partner for Cott as we strengthen our position in private label
beverages," said Jerry Fowden, Chief Executive Officer of Cott. "A
combination with Cliffstar expands Cott's product portfolio and
manufacturing capabilities, enhances our customer offering and growth
prospects, and improves our strategic platform for the future. Combined
with Cliffstar, Cott will be a more diversified company with long-term
advantages for our shareowners and retailer partners."
"In Cott, we have found the right long-term strategic partner for
Cliffstar," said Stanley Star, Chairman of the Board and co-founder of
Cliffstar. "Cott, like Cliffstar, has a long history of private label
excellence and quality as well as close partnerships with its customers and
suppliers. In addition to a strong position in juice and various new age
growth segments, Cliffstar brings expertise in juice ingredients,
processing and bottling that are complementary to Cott's strengths in
carbonated soft drinks. I believe the combination will be beneficial for
Cliffstar's employees, customers and suppliers into the future."
"We expect the combination with Cliffstar to be accretive to our
shareholders on a cash basis," added Fowden. "In addition to strategic and
operational upsides, the transaction is expected to generate significant
tax benefits and synergies. Adjusting for these factors, we believe the
purchase price is favorable relative to comparable transactions. This
transaction will transform Cott into a multi-category beverage producer
which we believe will benefit our customers and create value for our
shareholders."
Founded in 1970, Cliffstar, a privately-owned corporation headquartered in
Dunkirk, New York, is one of the leading suppliers of private label
beverages and the largest private label producer of apple juice, grape
juice, cranberry juice and juice-blends in North America. With $654
million trailing 12 month revenue, Cliffstar operates eleven facilities in
the United States, including five bottling and distribution operations,
three fruit processing facilities, two fruit receiving stations and one
storage facility, and has approximately 1,200 employees.
Financial Terms
The $500 million payable at closing and $25 million in anticipated
transaction costs are expected to be funded by a combination of new debt
issuance of up to $375 million, new common equity issuance of up to $95
million, and incremental borrowings under Cott's asset based lending
facility of $75 million. The specific amount of new debt and equity will be
determined at the time of issuance. Cott expects to amend its asset based
lending facility in connection with the transaction to increase the amount
of borrowings available under such facility. Both the financing and the
acquisition transactions are expected to close in the third quarter of
2010.
Expected Benefits of the Transaction
The combination with Cliffstar is expected to result in:
-- A larger, more balanced business with a diversified and complementary
portfolio across many categories of private label beverages, better
positioning Cott for future growth.
-- A broader portfolio with increased innovation capabilities and high
service levels as a combined supplier across multiple beverage
categories, including carbonated soft drinks, juices, and waters, as
well as new age beverages such as enhanced waters, and natural fruit
beverages. The combination provides an attractive single-stop solution
to the private label beverage needs of our retailer partners.
-- Total identified cost synergies of $20 million on an annualized basis
($14 million of which are expected to be realized in 2011). The
synergies are comprised of realization of economies of scale and the
optimization of administrative and operational groups.
-- Additional (and incremental to the above synergies) longer-term
opportunities for growth within a combined customer base through
leveraging of existing customer relationships and sales into new
beverage categories.
-- A significant cash tax benefit generated from the deduction of the
step-up in tax basis resulting from the acquisition of Cliffstar's
assets. The net present value of this cash tax benefit is estimated to
be approximately $75 million.
-- Pro forma trailing 12 month revenue (ended Q1 2010) on a combined basis
in North America of $1.8 billion and pro forma global consolidated
trailing 12 month revenue of $2.3 billion and Adjusted EBITDA of $246
million, or $260 million inclusive of 2011 synergies, but before
transaction-related costs and after adjusting for certain items (See
attached reconciliation of GAAP operating income to non-GAAP Adjusted
EBITDA).
-- Transaction expected to be accretive on a cash basis from year one
(cash basis accretion excludes the one-time expenses related to the
transaction and the impact of non-cash items such as the amortization
of intangibles after the transaction).
Cott Q2 2010 Estimates
Cott provided the following estimates of key financial metrics regarding
its estimated consolidated Q2 2010 results on a stand-alone basis:
-- Filled beverage volume of 207 million cases (8oz equivalents)
-- Consolidated revenue of $426 million
-- Operating income of $37 million
Cott clarified that the foregoing Q2 estimates are preliminary and actual
results could vary by up to 2-3% in either direction for revenue and
volume, and up to $2-3 million in either direction for operating income.
"Overall I am pleased with the preliminary results of our second quarter
performance, given the quarter saw a significant increase in
much-publicized national brand promotional activity," commented Fowden.
"While we would not typically comment in advance of final results, we hope
these estimates are helpful in evaluating the business combination with
Cliffstar."
Deutsche Bank Securities Inc. acted as financial advisor to Cott on the
Cliffstar transaction. Drinker Biddle & Reath LLP acted as legal advisor.
Morgan Stanley acted as financial advisor to Cliffstar on the transaction.
Skadden, Arps, Slate, Meagher & Flom LLP and Lippes Mathias Wexler Friedman
LLP acted as legal advisors.
Conference Call
Cott Corporation will host a conference call tomorrow, July 8, 2010, at
9:00 a.m. ET, to discuss the announcement, which can be accessed as
follows:
North America: (877) 407-8031
International: (201) 689-8031
A live audio webcast will be available through Cott's website at
http://www.cott.com. The call will be recorded and archived for playback on
the investor relations section of the website for a period of two weeks
following the event.
Supplemental information regarding the proposed acquisition of Cliffstar is
available on the financial reports section of the Company's investor
relations website at http://www.cott.com/investors
About Cott Corporation
Cott Corporation ("Cott" or the "Company") is one of the world's largest
non-alcoholic beverage companies and the world's largest retailer brand
soft drink company. With approximately 2,800 employees, the Company
operates bottling facilities in the United States, Canada, the United
Kingdom and Mexico. Cott markets non-alcoholic beverage concentrates in
over 50 countries around the world.
Website: www.cott.com
Non-GAAP Measures
Cott routinely supplements its reporting of earnings before interest,
taxes, depreciation & amortization in accordance with GAAP by excluding the
impact of certain items to separate the impact of these items from
underlying business results. Since the Company uses these adjusted
financial results in the management of its business, management believes
this supplemental information, including on a pro forma basis, is useful to
investors for their independent evaluation and understanding of the
transaction with Cliffstar. The non-GAAP financial measures described above
are in addition to, and not meant to be considered superior to, or a
substitute for, the Company's financial statements prepared in accordance
with GAAP. In addition, the non-GAAP financial measures included in this
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, Section 21E of the Securities
Exchange Act of 1934 and applicable Canadian securities laws conveying
management's expectations as to the future based on plans, estimates and
projections at the time the Company makes the statements. Forward-looking
statements involve inherent risks and uncertainties and the Company
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 the Company's
anticipated second quarter 2010 volumes, revenues, operating income and
earnings, the anticipated timing of the transaction, the completion of the
transaction on the terms proposed, the financing of the transaction on
terms currently anticipated, and the potential impact the acquisition will
have on the Company. The forward-looking statements are based on
assumptions regarding the timing of receipt of the necessary financing and
approvals, 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: (1) the ability to
obtain financing and consummate the proposed transaction; (2) receipt of
regulatory approvals without unexpected delays or conditions; (3) changes
in estimates of future earnings and cash flows; (4) changes in expectations
as to the closing of the transaction; (5) expected synergies and cost
savings are not achieved or achieved at a slower pace than expected; (6)
integration problems, delays or other related costs; (7) retention of
customers and suppliers; (8) the cost of capital necessary to finance the
transaction; and (9) 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 these 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 the Company's Annual Report on Form 10-K for the year ended
January 2, 2010 and its quarterly reports on Form 10-Q, as well as other
periodic reports filed with the securities commissions. The Company does
not, except as expressly required by applicable law, undertake to update or
revise any of these statements in light of new information or future
events.
COTT CORPORATION PRO FORMA EXHIBIT 1
NON-GAAP EARNINGS
BEFORE INTEREST, TAXES, DEPRECIATION & AMORTIZATION (EBITDA)
(in millions of U.S. dollars)
Unaudited
----------- ----------- -----------
For the 12
Cott Cliffstar Months Ended
Corporation Corporation April 3, 2010
----------- ----------- -----------
Net income (loss) $ 73.1 $ 82.7 $ 155.8
Interest expense, net 28.3 3.5 31.8
Income tax (benefit) (12.2) 0.0 (12.2)
Depreciation and amortization 65.1 13.9 79.0
Net income attributable to
non-controlling interests 4.9 0.0 4.9
----------- ----------- -----------
EBITDA 159 100 259
Adjustments to EBITDA
Restructuring (0.2) 0.0 (0.2)
Asset Impairments 3.5 0.0 3.5
Other expense (loss on buyback of
notes) 3.3 0.0 3.3
Inventory adjustments 0.0 (21.7) (21.7)
Incentive adjustment 0.0 2.0 2.0
----------- ----------- -----------
Adjusted EBITDA $ 166 $ 80 $ 246
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