Shares rise as CC spends €235m on biggest alcoholic cider brand in US
SHARES IN Clonmel-based drinks group CC rose marginally yesterday after it announced a $305 million (€235 million) acquisition of the Vermont Hard Cider Company, owner of the biggest alcoholic cider brand in the US.
The shares had traded up by as much as 10 per cent early in the day on news of the acquisition. However, the stock drifted lower as investors digested first-half results, which showed weakness in its core cider markets.
CC confirmed that its operating profit for the full year would be at the “lower end” of the previously stated range of €112 million to €118 million.
The Vermont acquisition is subject to regulatory clearance but CC said it had the potential to transform its sales in the US and internationally.
The business being acquired is expected to generate Ebtida (earnings before interest, tax, depreciation and amortisation) of $15 million in the year to the end of December 2012. It will be “immediately earnings accretive”.
Vermont Hard Cider owns the Woodchuck brand, a market leader in the US. It also has a cidery in Vermont, a national distribution platform and a 20 per cent share in a start-up Chinese brand called Gold Hard Cider.
This deal comes 11 months after CC paid up to $27.5 million to acquire Hornsby’s, the number two domestic US cider brand.
The Irish company also sells its Magners brand in pubs on the east coast of the US.
CC said it was likely to invest $25 to $30 million next year upgrading the Vermont facilities “to capture further growth” in the US cider market.
As part of the deal, Vermont Hard Cider’s president and chief executive Bret Williams and chief financial officer Dan Rowell will spend $7 million to buy 1.42 million CC shares.
CC’s net revenues for the six months to the end of August fell by 2 per cent to €263.4 million while its operating profit declined by 2.7 per cent to €65.6 million.
The company said wet weather in the summer had affected sales of its cider brands Bulmers and Magners in Ireland and the UK respectively. Neither the Euro 2012 football championships nor the London Olympics provided a bounce for the brands.
Strong sales of its Tennent’s beer helped to offset the weak cider sales, it added.
CC also announced that non-executive director Philip Lynch, who is head of the remuneration committee, will step down next month after eight and a half years on the board.
Fellow director John Burgess will resign later this year after a 13-year association with CC.
Joris Brams, managing director of CC’s international business, has been elevated to the board.
CC chairman Brian Stewart said Mr Lynch’s departure was a matter of “refreshing the board and more in line with corporate governance criteria”.
He said it had nothing to do with an investigation launched last year by the Financial Regulator into share dealings by Mr Lynch in CC stock in 2008.
When asked about the status of that investigation, Mr Stewart said: “I don’t know what it is.”