This beverage company is changing focus, selling its manufacturing business and reforming itself into a water, tea and coffee home/office delivery business.
Cott Corporation (COT)
From Gordon Pape’s Internet Wealth Builder
Until now, Cott Corporation (COT) was primarily a private label manufacturer of beverages with a vast array of customers, although the company does have a few of its own brands.
The company announced that it has sold its manufacturing business to Refresco (RFFRY), which is based in the Netherlands. The deal was all cash for US$1.25 billion. The manufacturing business generated US$1.7 billion in annual revenues.
When the deal closes, expected before year-end, Cott will be a water, tea, and coffee home/office delivery business. I believe that this deal is positive for Cott in that it allows the company to deleverage the business (the proceeds of the sale will be used to pay off debt), reduce customer concentration, and increase margins overall.
I also think that this makes the company more attractive as an acquisition target since many of the potential acquirers already have extensive manufacturing facilities. Also, if the company continues to look for more acquisitions this gives them dry powder to work with on future deals.
Buy with a target of US$18.
Glenn Rogers in Gordon Pape’s Internet Wealth Builder, www.buildingwealth.ca, 1-888-287-8229, August 14, 2017