Stephens Carves S&D from Cotts

Westrock Coffee Company, a portfolio company of The Stephens Group, has agreed to acquire S&D Coffee & Tea (S&D) from publicly traded Cott Corporation for $405 million in cash.

S&D Coffee & Tea is the largest coffee and tea manufacturer and supplier to restaurants and convenience stores in America; and also produces liquid coffee, tea, and botanical extracts. The company’s products are sold to more than 110,000 customers through national distribution and direct store delivery. S&D, led by CEO Ron Hinson, was founded in 1927 and is headquartered in Concord, North Carolina.

Cott Corporation acquired S&D in 2016 for $355 million which, at that time, was a 6x post synergy adjusted EBITDA multiple.

Little Rock, Arkansas-based Westrock Coffee, acquired by Stephens in 2017, is a vertically integrated branded and private label coffee company that sources, roasts, packages, sells and distributes to companies operating in the retail and hospitality markets. Westrock has offices in seven countries and is led by Scott Ford, co-founder and chief executive officer.

According to Westrock Coffee, the buy of S&D will create the leading integrated coffee company serving the needs of the retail, restaurant, convenience store, and hospitality industries. Once combined, the two companies will be led by Mr. Ford with Mr. Hinson continuing as chairman emeritus and it will have more than 1,700 employees and the capacity to roast, grind, and package more than 220 million pounds of coffee annually. Westrock will remain headquartered in Little Rock and S&D’s facilities in Concord will continue as a major center of operations with plans to continue the expansion of these facilities.

“This strategic combination will create the nation’s premier coffee, tea, and extract supplier that is capable of serving the most complex and demanding customers across the country and around the world,” said Mr. Ford. “We intend to use the scale of the new company to offer the most innovative beverage solutions with competitive pricing to our global clients while simultaneously providing a premium price to our farmer partners at origin.”

As part of this transaction, BBH Capital Partners will provide acquisition capital alongside The Stephens Group and other Westrock Coffee investors.

Boston-based BBH Capital Partners makes control and non-control investments of $50 million to $150 million in North American-based companies with enterprise valuations between $10 million to $500 million. Sectors of interest include healthcare, technology, media and telecommunications, and business products and services. The group’s investments are structured as a combination of equity and subordinated debt.

Little Rock, Arkansas-based The Stephens Group is a family-office that makes both minority and control investments in public and privately held companies. Sectors of interest include industrial and commercial products and services, specialty distribution, technology infrastructure and tech-enabled services, B2B food and beverage, and consumer products.

Cott Corporation (NYSE: COT; TSX: BCB) is a provider of water, coffee, coffee extracts, tea and filtration services in both North America and Europe, to more than 2.5 million customers including residences, businesses, restaurant chains, hotels and motels, retailers, and healthcare facilities. The company is led by CEO Tom Harrington and is headquartered in Tampa.

Cott has been actively moving towards becoming a pure-play water company. Earlier this month it agreed to acquire Primo Water, a provider of water dispensers, bottled water, and self-service refill drinking water, for $775 million.

“The combination of the sale of S&D, along with the recent announcement of Cott’s acquisition of Primo Water, positions Cott to be a pure-play water solutions provider with financial metrics more in line with our water peers,” said Mr. Harrington. When the buy of Primo is completed, Cott will change its corporate name to Primo Water.

© 2020 Private Equity Professional | February 3, 2020

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