C&C makes tasty acquisition
CIDER MAKER C&C made a strong statement of intent this week with its acquisition of the Vermont Hard Cider Company in the US.
When added to its Magners and Hornsby’s brands, CC will have a 48 per cent share of the US cider market.
The $305 million price tag is tasty, at 20 times the projected Ebitda for this year. The Hornsby’s multiple last year was 12 to 13 times when it was acquired.
Goodbody forecast that it would be full year 2017 before the return on the invested capital would exceed the cost of capital.
However, as a number of analysts have pointed out this week, the category is enjoying strong growth in the US (up 60 per cent in the first half of this year) and it is now attracting the attention of some of the big beer players – Heineken, AB InBev, Miller Coors and Carlsberg.
Vermont’s growth has been running at 25 per cent annually over the past three years and it has a new $24 million production facility in place.
Cider accounts for just 0.2 per cent of the long alcoholic drinks market in the US compared with 1 per cent in Canada and 2.2 per cent in Australia.
CC’s half year results illustrate the importance of developing new cider markets for the company.
Its net sales of €263.4 million were 3 per cent below consensus. A combination of recession, a wet summer and increased competition meant cider sales flagged in Britain and Ireland.
The Scottish executives who lead CC have shown a canny knack for a good deal, notably the Tennent’s acquisition in 2009, which has bedded in well.
Investors will hope that they have similar success with Vermont.
Some scorching hot summers wouldn’t go amiss.