TORONTO and CONCORD, N.C. -- Beverage company Cott Corp. has entered into a deal to acquire S&D Coffee Inc., a coffee roaster and provider of customized coffee and tea to the foodservice, convenience-store, hospitality and office segments, for approximately $355 million, representing a high 6X post-synergy adjusted EBITDA multiple.
Toronto-based Cott is one of the world’s largest producers of beverages on behalf of retailers, brand owners and distributors and one of the leading providers in the direct-to-consumer beverage services industry. It has global businesses in the office coffee services, direct to home and office water delivery, and retail segments. Their broad product portfolio includes coffee, brewed tea, bottled water, carbonated soft drinks, shelf-stable juice, clear, still and sparkling flavored waters, energy and sports drinks, ready-to-drink teas as well as micro-ground coffee, hot chocolate and cereals. Cott has significant filling, packaging, delivery and service capabilities.
S&D's CEO Ron Hinson and S&D's leadership team have agreed to join Cott and continue to lead the S&D business.
“The synergies S&D has with Cott, whether technology, supply chain, product, distribution channels or markets are abundantly clear,” Hinson said.
“The acquisition of S&D enables us to become a leading player in the coffee and tea categories due to their excellence as a manufacturer and their prominence as an elite supplier in the restaurant and convenience retail segments. With S&D now part of the Cott family, we can further leverage cost efficiencies and growth opportunities across all the Cott companies,” said Jerry Fowden, Cott's CEO.
"The S&D acquisition is another great step in our stated strategy to enhance our existing home and office water delivery, coffee, tea and filtration businesses where we believe our platform, operating strength and synergies can be leveraged. The addition of S&D brings our Better for You beverage platform to over 65% of our adjusted EBITDA on a pro forma basis with carbonated soft drinks representing just 12% of adjusted EBITDA," Fowden said.
S&D is a growing business with more than $550 million in estimated 2016 revenues. The acquisition broadens the distribution platform of Cott's existing DS Services coffee business in the United States by adding a leading scale platform with in-house roasting, grinding and blending capabilities alongside a national distribution system.
The acquisition of S&D is in line with Cott's strategy of focusing on acquiring cash-accretive businesses with higher growth while continuing Cott's beverage diversification outside of carbonated soft drinks, shelf-stable juices and large-format retail. It will serve as a platform for smaller accretive acquisitions and improve Cott's channel mix outside of large-format retail and supermarkets.
"We are very excited about expanding our coffee and tea platform in the United States with the addition of a growing, leading coffee and tea business with its own custom roasting capabilities,” said Tom Harrington, CEO of DS Services. “We believe the acquisition of S&D will provide meaningful benefits from our combined procurement efficiencies, vertical integration and distribution networks, as well as increased management expertise to create a stronger, cash generating, growth-oriented service platform throughout North America."
The acquisition, which is expected to close in August 2016, is subject to certain customary closing conditions and purchase price adjustments.