PAI explores Refresco exit

The Paris-based private equity firm is exploring options around a dual-track process that could see the EUR 514m-EBITDA business listed on the stock exchange or sold, one of the sources said.

A process is only likely to launch in the final months of this year, with requests for proposals from M&A advisers not expected to be sent out before September or October, a second source said.

Refresco and PAI declined to comment.

PAI acquired Refresco with an offer that valued the then-Euronext Amsterdam-listed company at an EV of EUR 2.2bn in October 2017. Credit Suisse and Rothschild advised the buy-side on the transaction.

Should the sponsor go through with a sale, it could see a narrow pool of potential bidders for Refresco, two sector bankers warned.

As the world’s biggest manufacturer of third-party branded drinks, the company is likely to prove too large to be acquired by its peers, one of the sector bankers said. Moreover, bottlers that produce brand-name drinks, such as Coca-Cola, do not have a clear rationale to do so, this banker added. The asset could be more suitable for private equity funds, the other banker said.

One trade player that could see merit in a deal is AG Barr, but the maker of soft drink Irn-Bru could face antitrust issues in a potential combination, a third sector banker said, adding that Refresco is also not keen on exposure to branded products.

Taking Refresco back to the public markets is the likeliest way to realise full value, the first banker said, although the second source said this hinges on the performance of the equity markets between now and the autumn.

Should it decide on a listing, the company would most likely opt for an IPO in the US, where it wants to boost its presence, the first source said. Refresco acquired Cott Beverages, a Florida-based soft-drink-concentrate maker, for USD 50m in 2019, having already acquired Cott’s bottling operations for USD 1.25bn in 2018.

In the case of a listing, a comparable business that could guide Refresco’s valuation include branded-drinks producer Britvic and AG Barr, given their exposure to the same sector, a fourth sector banker said.

However, these firms, as well as PepsiCo and Monster Beverage, are only peers in the loosest sense, as they – unlike Refresco – own the brands of the drinks they make, the third banker said.

Rather, bottlers such as Coca-Cola Europacific Partners could be a better guide, the first banker and a fifth source familiar said.

The UK-based company, which produces and distributes drinks under Coca-Cola-owned brands in Europe, Indonesia and Oceania, trades at 15.3x EV/EBITDA on its 2020 results, pro-forma for the USD 6.58bn acquisition of Coca-Cola Amatil, which it completed in April, according to Dealreporter analytics.

Still, the first banker cautioned that such firms are essentially direct-to-consumer sales units for Coca-Cola. Refresco’s EV/EBITDA multiple should accordingly be marked down a bit for lacking such an eminent brand, the third source.

Refresco’s valuation could be in region of 12x-15x EV/EBITDA, the fifth source said, with the first source agreeing that a low double-digit multiple is appropriate.

PAI, which Mergermarket data shows bought the business for 10.4x EV/EBITDA, has “done wonders” with the portfolio company, the fifth source said. It has differentiated Refresco’s proposition, emphasising its industry-leading ability to serve clients’ manufacturing needs, this source said. The company has also embarked on a string of acquisitions under PAI, including the purchase of a UK-based manufacturing site from Coca-Cola Europacific Partners, and Hansa-Heemann, a Germany-based maker of mineral water and soft drinks, earlier this month.

The company's latest annual report touted improvements in all key metrics, a diversified clientele and "a healthy M&A pipeline to further execute our buy-and-build strategy". The impact of Covid-19 was minimal, prompting just a EUR 9m adjustment to EBITDA for the year, while the company noted pandemic-driven demand for "lower-margin brands, less complex products and a trend towards larger packaging formats".

Its sales and adjusted EBITDA grew from EUR 2.3bn and EUR 214m, respectively, in 2017, to a reported EUR 4.1bn and EUR 514m in 2020.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Exits
• Benelux
• Industrials
• PAI Partners
• IPO