Glenboden M & A Originations

Refresco’s serial acquiror status underlined by third deal in two months

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Origination Status buyer announcement of signed agreement, April 2007
Asset Sun Beverages Company NV (Belgium), private label soft drinks and mineral water producer
Buyer Refresco Holding BV (ultimately Iceland), leading European soft beverages producer
Seller Bencis Capital Parners (private equity) and minorities
Buyer Rationale to have presence in all major EU markets
Seller Rationale attractive valuation, joining bigger group in scale business
NBs Refresco also acquired Histogram (UK) and Kentpol (Poland) in previous two months
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This deal underlines the rapid growth of Refresco as a leading producer of soft beverages for private label (and as a co-packer for A-brand partners). It also serves to illustrate how vibrant M&A activity can be in the private label universe, in the shadows behind the big branded deals. Geographic coverage is driving Refresco’s acquisition activity, as they need to be close to their customers in this bulky business. After this latest deal, Refresco will have 17 manufacturing facilities spread across eight countries. But there are many more geographies that they could cover in Europe.

Refresco started in 1999 as a juice business, but has successfully diversified into carbonated soft drinks and mineral water. Their model is to grow by acquisition, throughout the EU, and introduce strict cost controls and other efficiencies in this low margin business.

SBC gives them a presence in Belgium (and strengthens their French and Dutch businesses); the Histogram deal earlier in March gave them a foothold in the UK; Poland’s Kentpol likewise gave them a presence in the largest country of ‘new Europe’.

Refresco’s sales revenue in 2007, after these three deals plus organic growth, could grow by 50% to reach the milestone € 1 bln level. Not a bad performance by Refresco’s management; having the platform to reach their ambitious 2007 target already in April.

But there are risks with this strategy. The fact that Refresco has been able to do so many deals, and grow so quickly in sales revenue, surely reflects a major over-capacity in unbranded soft beverages manufacturing in Europe.

Two of these latest acquisitions were of under-invested MBO companies. The Company’s € 1 bln turnover is now spread across as many as 17 facilities and nearly 2.000 employees. Can they really continue to ‘buy-and-build’, and to keep a small head office operation ?

One day they might need to stop acquiring; unless of course the trend for private label to grow at the cost of branded equivalents, in soft beverages, accelerates.

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