Primo Water Fetches Premium Price Amid Pending Acquisition by Cott

Beverage and food distribution giant Cott is buying Primo Water as part of a larger plan to become a 'pure play water company.'
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Primo Water (PRMW) - Get Report gushed higher Monday as investors snapped up shares of the bottled water company in the wake of its pending acquisition by Cott Corp. (COT) - Get Report.

Primo's stock price rocketed 24.35% to $13.79 a share after the beverage and food distribution giant agreed to buy Primo for $775 million in cash and stock, or $14 a share.

Cott said it was buying Primo as part of a larger plan to become a "pure play water company" as it explores "strategic alternatives" for its S&D Coffee and Tea business, including a potential sale.

Cott also plans to rename itself Primo Water Corp. after the completion of the deal, now slated for March.

Toronto-based Cott has been on a bottled-water buying spree over the past few years, having previously acquired DS Services and Eden Springs as the company seeks to shift into the higher-margin water business.

"The acquisition of Primo and the sale of S&D will result in a pure play water company that increases top-line growth and margins and drives long-term value creation for our shareholders," said Tom Harrington, Cott's CEO, in a press statement.

In November, Primo parted ways with CEO Matt Sheehan amid pressure from activist investment fund Legion Partners, which owned 9.1% of the company at the time. 

The newly combined water company will generate more than $2 billion in sales and will do business in 26 countries, said Billy Prim, Primo's interim CEO and executive chairman of Primo, in a press statement.

"This combination of two highly recognizable water companies creates compelling value," Prim said.