Primo Water and BlueTriton To Merge

Primo Water Corporation (NYSE: PRMW) (TSX: PRMW) and an affiliate of BlueTriton Brands, Inc. today announced the entry into a definitive agreement to create a leading North American pure-play healthy hydration company in an all-stock transaction that was unanimously approved by their respective Boards of Directors. Upon closing of the Transaction, Primo Water shareholders and holders of incentive equity are expected to own 43% of the fully diluted shares of the combined company, and BlueTriton shareholders are expected to own 57% of the fully diluted shares of NewCo.

The Transaction offers a compelling strategic rationale and combines the complementary strengths of Primo Water and BlueTriton, creating a North American leader in pure-play healthy hydration with diversified offerings across products, formats, channels and consumer occasions. The combined company will have significant financial and operating presence with combined Net Revenue and Adjusted EBITDA¹, inclusive of $200 million in estimated cost synergies, of $6.5 billion and $1.5 billion, respectively, for the twelve month period ended March 31, 2024.

NewCo is expected to be dual headquartered in Tampa, Florida and Stamford, Connecticut. Dean Metropoulos, the current Chairman of the Board of BlueTriton, will serve as Non-Executive Chairman of the Board of the combined company. Upon close, Robbert Rietbroek, the current Chief Executive Officer of Primo Water, will serve as Chief Executive Officer, David Hass, the current Chief Financial Officer of Primo Water, will serve as Chief Financial Officer, and Rob Austin, the current Chief Operating Officer of BlueTriton, will serve as Chief Operating Officer.

Primo Water is a leading North America-focused, branded pure-play water solutions company with a broad portfolio of sustainable hydration brands operating primarily in the large format water category. Primo Water’s water solutions expand consumer access to purified and spring water to promote a healthier, more sustainable lifestyle. Primo Water’s brands include Primo Water^®, Mountain Valley^®, Crystal Springs^®, Sparkletts^® and Alhambra^®, amongst others. Primo Water’s Net Revenue from continuing operations grew from $1.4 billion in 2021³ to $1.8 billion during the twelve-month period ended March 31, 2024, a compounded annual growth rate of 11%. Adjusted EBITDA¹ grew from $304 million to $399 million over that same period, a compounded annual growth rate of 13%.

BlueTriton is a North American beverage company with a portfolio of iconic national and regional water brands, including Poland Spring^®, Deer Park^®, Ozarka^®, Ice Mountain^®, Zephyrhills^®, Arrowhead^®, Saratoga^® and Pure Life^®. Through its ReadyRefresh^® business in the United States, BlueTriton also serves the home and office beverage delivery segment with a portfolio of water brands. BlueTriton was acquired in February 2021 by an affiliate of One Rock Capital Partners (“One Rock”), in partnership with Metropoulos & Co. Since the acquisition, BlueTriton’s Net Revenue grew from $3.9 billion in 2021 to $4.7 billion during the twelve-month period ended March 31, 2024, a compounded annual growth rate of 9%. Adjusted EBITDA¹ grew from $531 million to $857 million over that same period, a compounded annual growth rate of 24%.

Robbert Rietbroek, Chief Executive Officer of Primo Water, said, “We are excited to combine Primo Water with BlueTriton to create a leading North American pure-play healthy hydration company. The Transaction is expected to deliver significant value to our shareholders along with the opportunity to participate in the long-term upside potential of the combined company, which will build upon and complement our existing healthy hydration platform. The combined company will benefit from a diversified portfolio of iconic brands, a national footprint and the strength of the combined delivery platform to better serve customers anywhere and anyway they hydrate. Under the stewardship of One Rock and Metropoulos & Co., BlueTriton delivered net revenue growth and increased profitability for both its retail brands and ReadyRefresh.”

Joey Bergstein, Chief Executive Officer of BlueTriton, said, “The combination of BlueTriton and Primo Water enables our iconic, trusted brands, many with over 100 years of rich heritage, to further expand distribution and reach a broader base of customers with healthy hydration solutions. With greater presence, we also believe that we will have greater ability to positively impact our communities, invest in water stewardship, and bring circular packaging and refillable options to more people in more places. Thanks to the hard work and dedication of our team, our business has experienced strong momentum leading us to this exciting combination and a bright future with many opportunities for continued growth. I look forward to working together with the Primo Water team to make this Transaction a success for all of our stakeholders.”

Dean Metropoulos, incoming Chairman of NewCo, said, “Today’s announcement marks an important milestone for the North American beverage category with the creation of a new, leading healthy hydration platform. The increased presence, diversified product portfolio, focus on free cash flow generation, strong balance sheet and estimated cost synergies provide the foundation for long-term value creation for our shareholders.”

The Transaction will bring together Primo Water and BlueTriton’s complementary strengths, creating a leader in North American pure-play healthy hydration with combined Net Revenue and Adjusted EBITDA¹, including $200 million in estimated cost synergies of $6.5 billion and $1.5 billion, respectively, for the twelve month period ended March 31, 2024. One-time costs associated in the capture of the $200 million synergies opportunity are estimated to be approximately $115 million.

The combined company will benefit from a diversified portfolio of iconic brands to provide high-quality service to consumers across product formats, channels, price points and usage occasions. It will have a leading healthy hydration brand portfolio complemented by the convenience of a sustainable delivery platform with extensive reach to serve millions of customers, leveraging technology to enhance customer experience, route design and continued carbon footprint reduction.

The Transaction is expected to present an estimated run-rate cost synergies opportunity of approximately $200 million, which the companies estimate will be fully realized within 3 years following the closing of the Transaction.

The combined company generated over $565 million in combined Adjusted Free Cash Flow⁴ for the twelve month period ended March 31, 2024 and is targeting combined normalized capital expenditures⁵ as a percent of net revenue to be approximately 4.0%-5.0% going forward.

The Transaction was structured to allow NewCo to keep both Primo Water and BlueTriton’s bonds and term loans in place, if the parties desire to do so. At closing, combined net leverage is expected to be approximately 3.0x, inclusive of estimated run-rate cost synergies, assuming that closing occurs during the first half of 2025 and that the existing indebtedness of Primo Water and BlueTriton remain outstanding. The combined company is targeting deleveraging to Net Debt/Adjusted EBITDA⁶ of 2.0x – 2.5x in the medium-term following the closing of the Transaction.

NewCo currently anticipates maintaining Primo Water’s current annualized dividend of $0.36 per share. The long-term dividend policy of the combined company will be determined and communicated post-closing.

Under the terms of the agreement, Primo Water and BlueTriton shareholders will exchange their respective shares into shares of a new holding company. Upon closing of the Transaction, Primo Water shareholders and holders of incentive equity are expected to own 43% of the fully diluted shares of NewCo, and BlueTriton shareholders are expected to own 57% of the fully diluted shares of NewCo; the portion of shares of NewCo in excess of 49% that are held by any individual or group of former BlueTriton shareholders would be in the form of a separate class of common stock that is non-voting as to the election of directors of NewCo. The combined company is expected to continue to be listed on the NYSE, subject to approval of such listing by the NYSE.  Upon closing of the Transaction, the common shares of Primo Water, as a wholly owned subsidiary of NewCo, will no longer be listed on any public market.

Under the terms of the definitive agreement, the Transaction will be effected by way of a court-approved plan of arrangement involving Primo Water under the Business Corporations Act (Ontario) and a merger involving BlueTriton under the laws of Delaware.

The Transaction is subject to approval by Primo Water’s shareholders, as well as the satisfaction of customary closing conditions, including expiration of the waiting period under the HSR Act, receipt of other regulatory approvals and court approval of the arrangement of Primo Water. The Transaction is expected to close in the first half of 2025.

The directors and executive officers of Primo Water, holding an aggregate of approximately 2.1% of the outstanding common shares of Primo Water, have each entered into support and voting agreements to vote their shares in favor of the arrangement of Primo Water.

The definitive agreement permits Primo Water to continue to pay its regular quarterly dividend to shareholders and to pay a special dividend to its shareholders in an aggregate amount of up to $133 million, or $0.82/share². Primo Water intends to pay the special dividend following board approval and setting of the record date and payment date prior to closing of the Transaction.

A copy of the arrangement agreement and plan of merger will be filed with the U.S. Securities and Exchange Commission (the “SEC”) and on Primo Water’s SEDAR+ profile and will be available for viewing at www.sec.gov and www.sedarplus.ca.

The combined company is expected to initially have a 15-person Board of Directors, 7 members of which will be initially appointed by Primo Water, 7 members of which will be initially appointed by BlueTriton and 1 member of which will be mutually agreed.

Bank of America Securities acted as exclusive financial advisor and Faegre Drinker Biddle & Reath LLP, Goodmans LLP, and Kirkland & Ellis LLP served as legal advisors to Primo Water in the Transaction. BMO Capital Markets Corp. was also financial advisor to Primo Water’s Board of Directors in connection with the Transaction.

Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc. acted as financial advisors and Latham & Watkins LLP and Stikeman Elliott LLP served as legal advisors to BlueTriton.

Primo Water is a leading North America-focused pure-play water solutions provider that operates largely under a recurring revenue model in the large format water category. Primo Water’s revenue model includes its industry leading line-up of innovative water dispensers, which are sold through approximately 11,200 retail locations and online at various price points. The dispensers help increase household and business penetration which drives recurring purchases of Primo Water’s water solutions, which includes Water Direct, Water Exchange, and Water Refill. Through its Water Direct business, Primo Water delivers sustainable hydration solutions direct to customers, whether at home or to businesses. Through its Water Exchange business, customers visit retail locations and purchase a pre-filled bottle of water. Once consumed, empty bottles can be exchanged at our recycling center displays, which provide a ticket that offers a discount toward the purchase of a new bottle. Water Exchange is available in approximately 17,500 retail locations. Through its Water Refill business, customers have the option to refill empty bottles at approximately 23,500 self-service refill drinking water stations. Primo Water also offers water filtration units across North America.

Primo Water’s water solutions expand consumer access to purified and spring water to promote a healthier, more sustainable lifestyle while simultaneously reducing plastic waste and pollution. Primo Water is committed to its water stewardship standards and is proud to partner with the International Bottled Water Association (IBWA) in North America which ensures strict adherence to safety, quality, sanitation and regulatory standards for the benefit of consumer protection.

Primo Water is headquartered in Tampa, Florida. For more information, visit www.primowatercorp.com.

BlueTriton Brands, Inc. is a water and beverage company in North America that produces and distributes a portfolio of brands of spring water, purified water, and other beverages, which include Poland Spring^®, Deer Park^®, Ozarka^®, Ice Mountain^®, Zephyrhills^®, Arrowhead^®, Origin^™, Saratoga^®, AC+ION^®, Pure Life^®, B’EAU^®, and Splash Refresher^™.

BlueTriton also owns and operates ReadyRefresh^®, a reuse and refill platform for home and office beverage delivery in the United States, providing access to a broad portfolio of water and beverage products, the majority of which are sold in reusable, multi-serve bottles. As one of the leaders in home delivery and reusable packaging, the company strives to save customers time by conveniently and more sustainably delivering products to their door. ReadyRefresh is proud of its role in helping reduce waste by delivering healthy hydration to our neighbors, businesses, and communities in 3- and 5-gallon reusable bottles, which are collected, sanitized, and refilled.

Headquartered in Stamford, Connecticut, BlueTriton is a privately held company with operations and distribution primarily in the United States and Canada, employing more than 7,000 employees. BlueTriton manages water resources for long-term sustainability and helps protect more than 20,000 acres of watershed area owned by the company from harm and destruction. The company sources from 56 springs and has 30 production facilities across North America, with some verified to the Alliance for Water Stewardship (“AWS”) Standard. BlueTriton is a Water Champion with The Water Council and has committed to be verified under their WAVE program.