Private label beverage producer Cott Corporation has agreed to acquire US-based water and coffee producer DSS Group for $1.25bn.
The two companies have signed a definitive merger agreement, which will be closed by the end of January 2015.
DSS Group is the parent company of DS Services of America. It produces water and coffee direct-to-consumers in the US.
Cott has valued DSS at seven times its adjusted EBITDA.
Following the acquisition, DSS will operate as a subsidiary of Cott.
The acquisition will see Canada-based Cott expanding its beverage portfolio into new and growing markets, including water and coffee home and office delivery services, water filtration services, and retail services.
Cott will also secure an additional national direct-to-consumer distribution channel with the 2,100 customer routes operated by DSS.
The company expects the acquisition to provide cost and revenue synergies of approximately $25m a year by the end of 2017.
Cott CEO Jerry Fowden said: "The DSS acquisition substantially accelerates our diversification strategy, bringing a strong home and office water and coffee beverage platform and direct-to-customer delivery network into our portfolio. DSS has established a scaled national direct-to-customer network and is led by an experienced senior management team.
"This acquisition meets all of the criteria established within our disciplined acquisition guidelines, including acquiring businesses within growing categories and with higher margins while enhancing product, package and channel diversification.
"Following this acquisition, Cott will have a more growth oriented, higher margin business and a more balanced revenue and earnings base."
Image: DSS produces produces water and coffee direct-to-consumers. Photo: courtesy of pandpstock001 / FreeDigitalPhotos.net.
