DSS Group Inc deal has helped put fizz back in Cott Corp’s shares

A view of some of Cott Corp.'s soda brands.

TORONTO – It\’s been quite a long time since Mississauga, Ont.\’s Cott Corp. has been a stock to look at, so market observers who take a look at the top performers of 2015 around the Toronto Stock market may be set for a surprise.

In November, when the private-label beverage manufacturer for clients such as Walmart Stores Inc. announced plans to acquire U.S. water and occasional purveyor DSS Group Inc. for US$1.25 billion, things were looking bleak. Cott had just posted its 11th-consecutive quarter of sales declines, its stock saw a negative total return of 7% for the past five years and it had failed to find a buyer after effectively hanging a \”for sale\” sign in the window for months.

Then hedge funds began to notice what looked like a value opportunity. Cott has strong cash flow and an attractive dividend compared to the cheap cost of its shares and also the DSS Group acquisition reduced its exposure to the declining carbonated beverage market.

Since Cott announced its intend to acquire DSS Group on Nov. 6, its stock price on the Nyse has increased 49% from US$6.24 to close at US$9.30 Tuesday. Cott lags only Valeant Pharmaceuticals International Inc. in performance around the Toronto Stock Exchange since Jan. 1.

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