OREANDA-NEWS. Primo Water Corporation (Nasdaq:PRMW), a leading provider of multi-gallon purified bottled water, self-service refill water and water dispensers, and Glacier Water Services, Inc., a leading provider of high-quality drinking water dispensed to consumers through self-service refill water machines, today announced that they have executed a definitive merger agreement pursuant to which Primo will acquire all outstanding shares of Glacier.

With the strategic acquisition, Primo will have approximately 46,000 retail locations throughout the U.S. and Canada. The transaction will unite two highly complementary brands and is intended to generate significant operating scale through an expansive refill and exchange network. Additionally, the acquisition will drive future cross-selling opportunities, significant cost savings and consistent cash flows. On a pro forma trailing twelve months (“TTM”) basis ended June 30, 2016, the acquisition creates a combined company with approximately $272.6 million in net sales, $14.3 million in income from operations and $45.4 million in adjusted EBITDA. The acquisition will provide retail partners and consumers a diversified, high-quality water and water dispenser offering. For consumers, the combination will provide access to purely amazing water throughout leading U.S. and Canadian retailers, almost doubling Primo’s existing location total. 

“We are excited to announce the acquisition of Glacier Water, an industry leader in self-service refill water with an exceptional brand. Together, we will continue to drive our mission of Inspiring Heathier Homes thru Better Water. This acquisition provides the opportunity to create significant value for our shareholders and offers strong benefits for our consumers and retail partners,” commented Billy D. Prim, Primo’s Chairman and Chief Executive Officer. 

“Glacier and Primo have a common mission and together we intend to build upon our respective strengths to further develop our service model and drive efficiencies as we broaden our consumer demographics through complementary customer bases across North America,” stated Brian McInerney, Chief Executive Officer of Glacier Water.

Compelling Strategic Rationale

Primo believes the acquisition will provide the following strategic and financial benefits:

Doubles key financial results and achieves significant scale – Primo will scale immediately, more than doubling revenue, operating income and adjusted EBITDA with minimal shareholder dilution, creating long-term value.

Diversifies retailer concentration – With the minimal overlap of retail partners and an enhancement in the retail channels, the combined Company will drive greater diversification in revenue and cash flow concentration. Additionally, Primo will significantly increase the size of the overall recurring water business as a percentage of the Company’s sales, minimizing the impact of fluctuations in Dispenser sell-in.

Creates operational and shared service synergies – The combination is expected to generate approximately $6.0 to $7.0 million in annual operational and shared service synergies within 36 months of closing, creating incremental value for Primo stockholders over time.

Offers cross-selling opportunities – The combination is expected to expand retailer partnerships with significant opportunities for cross-selling in more diverse retail channels. Additionally, the combination provides more opportunities for Primo dispenser customers to connect with Primo & Glacier water locations.

Supports rapid deleveraging with strong cash flows – Primo’s track record of growing cash flows along with its ability to de-leverage is enhanced with the addition of Glacier Water’s recurring revenues and cash flows. Primo expects this to help achieve a senior debt leverage ratio of less than 3.0x by 2018.

“We believe this transaction provides us with a tremendous opportunity to expand and diversify our geographic footprint and retail relationships, create operational synergies and drive future growth in sales, cash flow and profitability, all while providing consumers access to high-quality water at economical prices,” stated Matt Sheehan, Primo’s President and Chief Operating Officer.

Transaction Highlights
The total preliminary transaction consideration is approximately $263 million, consisting of approximately $50 million in cash, approximately $36 million in Primo common stock, approximately $177 million of net indebtedness and preferred stock being assumed or retired, and five-year warrants to purchase 2.0 million shares of Primo’s common stock at an exercise price of $11.88 per share, subject to adjustments based on any increases in Glacier’s debt and certain transaction expenses. The assumed indebtedness includes Glacier’s trust preferred securities due in 2028, which will remain outstanding and will not be affected by the transaction. The acquisition agreement has been unanimously approved by the Board of Directors of both companies. The transaction is expected to close in late 2016, subject to customary closing conditions.

The transaction will add a talented group of executives to the Company, with tenured backgrounds and proven track records. Upon closing of the transaction, Brian McInerney, CEO of Glacier Water, and key management will remain in place and operate the combined refill businesses, reflecting their commitment in the future success of the combined company. The combined company will continue to be headquartered in Winston-Salem, NC and will keep a presence in Vista, CA post-closing.

Advisors
The BMO Capital Markets acted as financial advisor to Primo Water. Primo Water intends to fund the cash portion of the transaction consideration through a fully committed financing provided by Goldman Sachs Bank. Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. and K&L Gates LLP acted as legal counsel to Primo Water. Primo has also hired Montgomery, Coscia & Greilich LLP as an integration consultant to assist in the integration planning.

J.P. Morgan Securities LLC acted as financial advisor to Glacier. Ervin, Cohen & Jessup LLP acted as legal counsel to Glacier.
  Primo
Water		 Glacier
Water		 Pro Forma
TTM
Net Sales $ 132.0   $ 140.6   $ 272.6  
Income from Operations $ 6.8   $ 7.5   $ 14.3  
Adjusted EBITDA $ 21.1   $ 24.3   $ 45.4  

About Primo Water Corporation
Primo Water Corporation (Nasdaq:PRMW) is North America’s leading single source provider of multi-gallon purified bottled water, self-service refill water and water dispensers sold through major retailers throughout the United States and Canada. 

About Glacier Water Services, Inc.
Glacier is the leading provider of high-quality drinking water dispensed to consumers through self-service water machines located at supermarkets and other retail locations.