The Dutch-based soft drinks and fruit juices bottler for A-brands and retailers agreed the deal which represents an EV/adjusted EBITDA multiple of 7.3x and is in line with the average multiple paid by Refresco on previous transactions.
Refresco has established its leading position in Europe over the past 16 years through the successful execution of its buy and build strategy, and this acquisition sees the bottler enter the North American market for the first time.
The acquisition of Whitlock Packaging significantly expands Refresco’s addressable market and substantially grows its co-packing to 34% of total group volume.
The US soft drink bottling market is still fairly fragmented with a limited number of players offering nationwide coverage. At the same time, more brand owners are looking to outsource production to co-packing partners.
Eric Kang, analyst at ratings agency Moodys, explained that smaller brands, which have been gaining market share, tend to have an asset-light model and therefore do not want to operate manufacturing facilities. Concurrently, larger brands have increased the pace of innovation in order to protect their market share and typically outsource production of new product launches.
“However, Refresco will likely face competition from North American players such as Cott Corporation, which are also increasingly focusing on co-packing.”
He added: “The acquisition is credit positive for Refresco because it will not only strengthen its scale and geographic and product diversification, but also provide future consolidation opportunities in a fragmented US market, despite a modest increase in leverage and limited merger synergies.”
Whitlock Packaging is a leading bottler in co-packing services, headquartered in Oklahoma, and employing more than 550 people across three sites.
The company operates in the soft drink categories of juices, RTD teas, sports, energy and still drinks. In 2015 Whitlock Packaging’s volume amounted to approximately 900 million liters, split between CoPacking (98%) and Private Label (2%). The company’s annual revenue, mainly related to filling fees, amounted to approximately £96m.
Whitlock Packaging can produce all major packaging formats and was one of the first US bottlers to produce aseptic beverage cartons.
Refresco has developed a successful private label business in Europe and intends to leverage its experience to further develop Whitlock Packaging’s private label capabilities.
Hans Roelofs, chief executive of Refresco, said the company had been carefully exploring opportunities to enter the North American market for some time.
“Whitlock Packaging provides a perfect strategic fit, as it is a market-leading player focused primarily on co-packing – an area of our business that we actively want to grow. Whitlock Packaging adds a new and exciting platform for growth for Refresco in North America. About 80% of the customers of Whitlock Packaging are already customers of Refresco in Europe. As such, Whitlock Packaging offers the opportunity to grow in a new market alongside existing customers, while offering them similar and reliable supply chain solutions as we do in Europe.”
David Moller, chief executive of Whitlock Packaging, added: “Joining an international independent bottler like Refresco fits our company ambitions well and substantially increases our scale and innovation power. Together we can pursue opportunities in the fragmented US market and offer customers high quality beverages and the widest range of possibilities in both North America and Europe.”
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