S&D Coffee & Tea

Cott Corp. (NYSE: COT) (TSX: BCB) is acquiring S&D Coffee Inc., coffee provider to U.S. gas stations and convenience stores, for $355 million.

S&D, based in Tampa, Florida, roasts coffee and sells coffee, tea and extracts to foodservice companies, convenience stores, gas stations, hospitality businesses and offices in the U.S. Ron Hinson, CEO of S&D, and the company’s leadership team will join Cott and continue to run the business.

Cott based in Toronto, is one of the world’s largest producers of beverages for retailers, brand owners and distributors, including a top-five position in the market for U.S. and European office coffee services and filtration services. Cott reaches more than 2.3 million customers through North American and European routes.

The S&D deal follows Cott’s strategy of acquiring higher growth businesses that diversify Cott’s business outside of carbonated soft drinks, juices and large-format retail and supermarket stores. Following the S&D acquisition, Cott’s “Better for You” beverage business will account for 65 percent of the company’s adjusted Ebitda, compared to 12 percent for carbonated soft drinks, says Jerry Fowden, Cott CEO. Both strategic and private equity investors have been eagerly buying up organic and healthy food brands in the food and beverage sectors. The S&D acquisition will also give Cott a leading position in the coffee and tea foodservice industry in North America, complementing its bulk water, office coffee and filtration business, Fowden says.

S&D will have estimated revenue of more than $550 million in 2016. Adding S&D will broaden Cott’s existing coffee business, adding the S&D roasting, grinding and blending capabilities to Cott’s national distribution system. S&D is expected to anchor future acquisitions. Cott recently agreed to buy Eden Springs, seller of coffee machines, from Rhone Capital and Eden’s management. And in another recent coffee-flavored deal, JAB Beech Inc., a JAB Holding Co. subsidiary, agreed to buy the Krispy Kreme Doughnuts Inc. (NYSE: KKD) doughnuts-and-coffee chain.

The S&D transaction is expected to close in August. SunTrust Robinson Humphrey Inc. was Cott’s financial adviser on the deal.

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