* Deal to be financed by debt, eventual $200 mln share issue
* To add 29 production sites, including 19 in U.S.
* Comes three months after Refresco rejected a takeover bid (Adds CEO, analyst comments, detail, background, shares)
By Anthony Deutsch
AMSTERDAM, July 25 (Reuters) - Netherlands-based drinks bottler Refresco has agreed to buy the bottling activities of Canada-based Cott Corp for $1.25 billion, giving a big boost to its business in the United States, the world’s largest soft drinks market.
Cott will add 29 production sites to Refresco’s network, with 19 in the United States, four in Canada, one in Mexico and five in Britain.
“We will become the world’s largest independent bottler for retailers and A-brands,” Refresco chief executive Hans Roelofs told journalists in a call on Tuesday.
“We will be a leading company in a very fragmented market and absolutely No. 1 in the U.S. and UK.”
The new company will have combined production volume of approximately 12 billion litres, a quarter of which will come from Cott.
The deal comes three months after Refresco rejected a $1.5 billion takeover bid from French private equity investor PAI Partners, saying the offer was inadequate.
Roelofs said the deal with Cott was part of Refresco’s long-term strategy and in “no way” a defensive move aimed at protecting it from a takeover.
Refresco said it would finance the deal with debt and then expected to issue $200 million in new shares within a year of closing the deal, which is expected in the second half of 2017.
Cott’s bottling activities made sales of around $1.7 billion in fiscal 2016, and earnings before interest, tax, and depreciation and amortization (EBITDA) of nearly $137 million.
Synergies of $47 million are expected over three years, due to lower costs. The transaction is expected to boost earnings in the first year of consolidation “with about a 5 percent contribution,” Roelofs said.
ING analysts said there was a “solid strategic rationale” to the deal, but noted the expected boost to earnings did not take into account the dilution from the planned share issue.
They have a “buy” rating on Refresco shares, which were down 2.5 percent to 16.75 euros at 0835 GMT.
Refresco, which has bottling sites in New Jersey, Florida and Oklahoma, said 90 percent of customers in the United States would be within 400 miles of one of its bottling plants.
The company, which has a long-term goal to expand through acquisitions, said it would not seek other major deals in the coming 24 months while Cott was integrated into its business, but might make smaller bolt-on transactions.
$1 = 0.8577 euros Additional reporting Michal Aleksandrowiczby; Editing by Thyagaraju Adinarayan and Mark Potter