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Dunkirk's Cliffstar sold for $500M

Thursday, July 8, 2010

Business First of Buffalo - by Allissa Kline

Cott Corp. of Toronto said it has signed a definitive agreement to acquire privately held Cliffstar Corp. for $500 million in cash.

Cliffstar, located in Dunkirk, is a leader in juice manufacturing. Speculation has existed for the past year that the company, founded more than 100 years ago by Meyer Star, was a target for purchase. In a statement to employees, Chairman Stanley Star said he had mixed emotions about selling the historic juice producer.

“In Cott Corporation I have found the right long term strategic partner for Cliffstar. Like Cliffstar, Cott has a long history of private label excellence and quality as well as close relationships with its customers, associates and suppliers,” Star said. “This transaction takes the largest private label juice manufacturer and the largest private label carbonated soft drink manufacturer and forms North America’s largest private label beverage company.”

He added that the primary purpose of this acquisition is not to generate savings by eliminating headcount, but rather to bring two great complimentary companies together. Cliffstar has 11 facilities in the U.S. and 1,200 employees nationwide. In Western New York, it employs roughly half that number.

Cott, Canada’s largest soft-drink manufacturer, conducted a media conference Thursday following news of its acquisition. Cott CEO Jerry Fowden said Star will remain involved with the company as part of a three-year consulting agreement.

Cliffstar officials, including CEO Paul Harder, were not immediately available Thursday for comment. Harder, a veteran CEO with experience in the medical and automotive industries, was hired by longtime acquaintance Star in 2006.

Harder told Business First during a December 2009 interview that Cliffstar’s explosive growth at the start of the 21st century — it acquired several bottling and juice-making companies during the late 1990s and early 2000s — created challenges for the company. Plus, its largest client, which Harder wouldn’t name but is largely believed to the Walmart, ordered new products, pushing Cliffstar’s beverage-making ability to the max.

“As you grow, you cover inefficiencies with growth.” Harder said in the interview. “Our efficiencies, which had not been very good, fell even farther.”

One of Harder’s first tasks as CEO was to improve efficiency. To do it, he brought in experienced beverage-industry experts, and a new CFO. The team put new processes in place that increased Cliffstar’s gain-sharing output, which essentially means less bad product was manufactured.

The company reduced the number of shifts at most of its plants, which we running 24 hours, seven days a week, and cut its workforce by about 200 people.

“We’re much more efficient at producing product than we were before,” Harder said. “We went from 24 (hours) seven (days a week) to 24 (hours) five (days a week) and our output is about the same.”

In addition to the $500 million due at closing, which is expected in the next few months, Cliffstar will receive $14 million of deferred compensation to be paid over a three-year period. It could also receive up to $55 million for meeting certain performance measures during fiscal year 2010 and completing expansion projects this year. Cott (NYSE: COT; TSX: BCB) said it plans to fund the transaction in three ways: new debt issuance up to $375 million, new common equity issues up to $95 million and incremental borrowings under the company’s asset-based lending facility of $75 million.

“Cliffstar is an ideal partner for Cott as we strengthen our position in private label beverages,” Fowden said in a statement. “A combination with Cliffstar expands Cott’s product portfolio and manufacturing capabilities, enhances our customer offering and growth prospects and improves our strategic platform for the future. Combined with Cliffstar, Cott will be a more diversified company with long-term advantages for our share owners and retailer partners.”

Star told employees there will be “minimal integration of the companies through the end of 2010” so that both companies focus on closing out their current fiscal years. An integration plan to bring the two firms together is expected to begin in early 2011.

Read more: Dunkirk's Cliffstar sold for $500M - Business First of Buffalo