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By Sabah Meddings
(Bloomberg) -- Fevertree Drinks Plc surged after US brewer Molson Coors Beverage Co. agreed to buy a stake in the tonic and mixer maker.
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The Coors Light brewer will pay £71 million ($88 million) for 8.5% of Fevertree, a move aimed at helping the British company expand further across the US and tap into its production sites. Fevertree will begin a share buyback in February worth the same amount.
Shares of Fevertree, which makes drinks such as Madagascan Cola and Italian Blood Orange Soda, rose as much as 23% in London on Thursday. They remain down by more than a quarter over the past 12 months.
Since launching, Fevertree has used a combination of natural ingredients and savvy marketing to convince consumers to spend more on tonic water and soda. However, after a strong share price performance in the years that followed its 2014 initial public offering, the company lost its investor appeal as the pandemic-fueled boom in home cocktails faded.
The US accounts for around 35% of its business, but it has historically suffered from supply chain problems and higher sea freight costs, which have hurt profitability.
The strategic partnership is a “transformational deal,” for Fevertree, according to Jefferies analyst Edward Mundy. The tie-up will help expand Molson Coors’ non-alcoholic range, the US company said.
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