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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.'

Primo Water (PRMW) gushed higher Monday as investors snapped up shares of the bottled water company in the wake of its pending acquisition by Cott Corp. (COT) .

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.

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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.