William Blair initiated research coverage of Primo Water Corporation (PRMW $27.67), a leading North America–focused pure-play water solutions provider. Primo Water and BlueTriton, a leading provider of water and beverages in the United States and Canada, have announced plans to merge to create a leading pure-play healthy hydration company; the merger is expected to close by the end of 2024.
Analyst Jon Andersen expects the combined company can achieve “durable sales growth with strong margins and free cash flow generation.” The company plans to share more detailed financial projections for the combined entity once the merger is completed. Andersen initially projects that in 2025 the combined company’s sales could be around $7.2 billion and EBITDA margin in the ballpark of 20%, equating to EBITDA of roughly $1.4 billion in 2025.
“We believe the combined company will be well positioned as a top provider of water solutions given consumer demand for healthy hydration and the company’s portfolio of leadership brands, holistic go-to-market model, and scale and national footprint,” Andersen said. “The combined company seeks to deliver sustainable water solutions to consumers and offices via a portfolio of established brands that possess equity with consumers and retailers. Its offering is diversified across business lines, including retail (bottled water), water direct, water exchange, water refill and filtration, and water dispensers. The breadth and depth of the combined platform enable it to serve millions of customers and consumers, while the extensive footprint and deployed technology help ensure high levels of customer service and efficiency in the delivery networks through optimal route design.”
Andersen continued, “We believe the combined company will have meaningful sustainable growth prospects, aided by increasing buildouts at existing and new customers as it expands retail locations; cross-selling its portfolio to a broader customer base through different formats and channels; developing and commercializing new products such as functional, flavored, and premium segments; driving scale in rapidly growing businesses such as filtration; and implementing business optimization initiatives including (merger related) cost synergy realization.”
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