Reed's To Acquire Jones Soda For $9.8m

Reed's, a maker of sodas, has entered into a Letter of Intent (LOI) to acquire Jones Soda for about $9.8m in cash and stock. The deal will combine a number of soda brands, such as Reed's Ginger Brew, Virgil's, and Jones Soda.

The planned merger will provide the two companies with the opportunity to gain the potential benefits of increased size and scale, and also cost efficiencies in several aspects of the combined business, including administration, operations, and customer interface.

The companies added that the capabilities of the Reed's portfolio in the direct selling channel combined with Jones Soda's national distributor structure allows for future growth opportunities for each company's brands across these channels.

Chris Reed, founder, chairman and CEO of Reed's, said: We have watched Jones for years and have been impressed with its innovative marketing programs, strong brand recognition, and loyal customer following. I am confident that our portfolio of brands will benefit from Jones Soda's marketing savvy, as well as its organization's deep mainstream distribution relationships.

“At the same time, we believe our strong infrastructure and operational capabilities will help drive important efficiencies through Jones Soda's supply chain. With minimal customer and demographic overlap between our combined brands, we believe this transaction also provides us with compelling merchandising and growth opportunities in the years ahead.

Rick Eiswirth, chairman of Jones Soda, said: After evaluating a range of strategies aimed at improving our outlook, our board of directors determined that the proposed merger with Reed's offers our shareholders the most compelling long-term benefits of the available alternatives.

“We believe the combination of Jones and Reed's will create a substantially larger beverage business with a more powerful operating platform and a brighter future. We are especially pleased that the Jones shareholders will be able to participate in the potential upside of the combined business, as a meaningful portion of the consideration is in the form of Reed's stock.

According to the binding provisions of the LOI, Reed's and Jones Soda have time until April 5, 2010 to negotiate a definitive agreement on an exclusive basis. Since the transaction terms of the LOI are non-binding, they are subject to the negotiation, execution and delivery of a definitive agreement approved by the respective boards of directors of each company.

The companies do not intend to disclose developments with respect to negotiation of the definitive agreement until their respective boards of directors deem it appropriate. The transaction will also be subject to approval of the shareholders of both the companies.

Jones Soda also revealed that Joth Ricci will be stepping down as CEO effective April 2, 2010 in order to pursue other business opportunities.