Glenboden M & A Originations

Will Cott challenge Refresco in central Europe ?

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Origination Status proprietory origination, July 2013
Asset Sokpol Sp.z o.o. (Poland), leading domestic private label soft drinks bottler
Buyer candidates include Refresco, Cott
Seller family owners of Sokpol
Buyer Rationale market leadership in 'new Europe'
Seller Rationale acceptable valuation, consolidation pressures
NBs Refresco almost acquired Sokpol in 2008 before Icelandic financial crisis
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For at least two years, Cott has signalled an entry strategy into 'new Europe', in order to capture sources of growth in private label soft drinks bottling. But will they have the stomach to take on the main pan-European player in that space, Refresco, who is already establishing itself in that region ? One key acquisition battleground may determine the outcome.

Central Europe for growth in private label ...Cott is historically an Anglo-Saxon group focused almost entirely on the 'safe havens' as they call them of north America and the UK; a strategy recently confirmed by its acquisition of Calypso Soft Drinks.

However it's also keen to find new, higher growth markets; that puts central Europe on their radar screen - stable enough to become their next 'safe haven', but with huge near-term growth potential in private label.

A problem is that these markets are fragmented, making a large entry-point hard to carve out. In Poland alone, there's a 'top 10' of players all vying for long-term leadership slots (or waiting for higher valuations).

... Refresco patiently building its presence ... In this environment Refresco is patiently building a stake; starting with buying Kentpol in 2007, it then acquired Taja in 2011 and, through its international merger with the UK's Gerber-Emig, inherited a third Polish plant in 2013.

However the group is still far from achieving a leadership position. Major incumbents to overcome include Czech -controlled Kofola, as well as local owner -managed Bewa, Zbyszko and Sokpol.

Although over time, and so long as the group's highly-leveraged financial model has the stamina for it, one can expect Refresco to add more acquisitions in CE to its pan-European footprint.

... Sokpol the main acquisition targetA key battleground will be the family -owned Sokpol, which is the largest of the private label -focused producers of soft drinks in Poland.

It's an open secret that Refresco was in advanced negotiations to acquire Sokpol in 2008. However the financial crisis, and its impact on the group's Icelandic shareholders in particular, put an abrupt end to that transaction.

However we believe that Sokpol will come around for sale again in the next few years, albeit - according to its main shareholder - at a higher price than five years ago (see valuation).

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THIS LEAD'S VALUATION
Size (€ mln) 50
Sector soft drinks
Asset Quality Poland no.1 private label
Seller family
Buyer mid-cap plc
P/S 0,5
P/Ebitda 8,0
Type value estimate
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