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Timing seen ripe for Tropicana to pursue acquisitions

Photo: Tiffany Hagler-Geard/Bloomberg via Getty Images

Private equity firm PAI Partners' $3.3 billion acquisition of Tropicana is finally complete and the juice brand is ready to make bolt-on acquisitions, sources with knowledge of the company's thinking say.

Why it matters: It's still a strategic buyer's market, even if that buyer happens to be PE-owned.

Details: Bolthouse Farms — which was put on the auction block by PE owner Butterfly Equity, but subsequently pulled because valuations were not enticing — is a top candidate for Tropicana, sources say.

  • Suja Life, which has been exploring a sale to Bolthouse, is another potential target.
  • Meanwhile, there are several beverage businesses that are public companies that should be private, sources say, such as Vita Coco and Zevia.
  • Zevia has already voiced broad interest in a partnership, while one source notes Vita Coco is open to a deal.

The intrigue: The above isn't an exhaustive list, as there are a number of beverage startups in categories, such as bottled water and prebiotic soda that raised a lot of capital when money was cheap and valuations bubbly.

Catch up fast: Bottled smoothie and juice maker Bolthouse was acquired by Butterfly from Campbell Soup for $510 million in 2019.

Be smart: One near-term hurdle for Tropicana's buy-side aspirations is its debt load, another of the sources says.

  • Aggressive antitrust enforcement could also be a barrier.

Of note: Tropicana's debt was projected by Moody's to remain above 7x EBITDA through the first half of next year.

  • The rating agency downgraded the issuer, known as Naked Juice, to B3 back in January.
  • It took the action because of supply chain disruptions and a lower market share.

Flashback: PAI acquired a 61% stake in Tropicana in 2021 for $3.3 billion in pre-tax proceeds, with PepsiCo retaining a 39% stake.

  • The company was financed with an approximately $1.9 billion first-lien term loan and a $450 million second-lien term loan, per S&P.
  • The complicated process of detangling Tropicana from PepsiCo took more than a year following PAI's motion to acquire the business.
  • Tropicana had about $3 billion in annual revenue for the 12 months ended Sept. 22, per Moody's.

Tropicana, PAI, Bolthouse, Butterfly, Suja Life, Paine Schwartz, Vita Coco and Zevia did not immediately respond to a request for comment.

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