Monday 18 December 2017

C&C snaps up Gleeson Group in €58m deal that includes distributor's debts

Peter Flanagan

Peter Flanagan

Cider firm picks up Tipperary Water and Finches with access to 10,000 pubs countrywide

C&C is to buy one of the best-known drinks manufacturers and distributors in the country in a multimillion-euro deal.

The drinks company said it will acquire the Gleeson Group, which makes Tipperary Water and the Finches line of soft drinks, for €12.4m.

The deal includes a deferred payment of €4.4m, while C&C will also take on Gleeson's debt of some €45.6m, implying an enterprise value of €58m.

As well as having its own manufacturing business, Gleeson is also the biggest distributor of beers and other so-called long alcoholic drinks (LAD) in the country.

The deal gives C&C direct access to some 10,000 pubs and other licensed premises around Ireland.

C&C chief executive Stephen Glancey said the deal represented a "significant" investment in Ireland by the company and would also help diversify the business away from purely cider and lager.

"The acquisition has the potential to transform our existing Irish business through the addition of an extensive distribution network and the creation of an attractive, multi-beverage brand platform.

"The acquisition also accelerates the reshaping and diversification of C&C in Ireland. The extended portfolio and direct distribution network should create a more resilient trading model that is better suited to dealing with the challenges of both current and future trading environments.

"It is a model that has the potential to deliver growth through investment, further brand acquisition and new agency agreements," he added.

"Ireland remains a pretty significant revenue generator for us and we find this deal especially attractive.

"We think the market here is troughing and while it might be still taking time to bottom out, Gleeson is the number one distributor and it gives much more of a presence in the multi-beverage space," he added.

As well as giving C&C greater distribution power, it also gives them greater scope for financing pubs here.

In the UK, where the breweries own the vast majority of pubs, lending to the on-trade is common.

The deal, which is being financed out of existing facilities, will be earnings-accretive immediately, C&C said.

Davy stockbrokers' Barry Gallagher welcomed the deal, and highlighted the relatively low price of Gleeson at 5.7 times the company's 2012 EBITDA.

"It strikes us that C&C is taking further steps to move to a Tennent's-type model which has proved very successful in Scotland.

"Over the last three years, C&C in Ireland has moved from a 'mono-brand' strategy, based on the leading cider Bulmers, to a broader portfolio range including Tennent's, AB Inbev brands and some niche beers.

"This larger multi-beverage portfolio, the strong direct distribution network and production assets give C&C a stronger platform and greater influence in the Irish drinks market.

"Some synergy capture is also likely in time. The price paid for this strong platform does not look expensive to us," he added.

The deal is C&C's second acquisition in consecutive months. In October the company shelled out €305m (€235m) to buy the Vermont Hard Cider Company.

While the company has the "firepower" to do more deals, Mr Glancey said there was unlikely to be any more before the end of its fiscal year.

C&C closed the day up 3.3pc at €4.05.

Irish Independent

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