Vermont Pure May Get Siphoned Off

Take a big gulp of Vermont Pure Holdings (VPS ), the bottler and distributor of such brands as Vermont Pure and Hidden Springs. The company is the only remaining publicly traded pure play in U.S. bottled water. After a wave of buyouts, the U.S. water market is dominated by Nestlé of Switzerland, which owns Perrier, Deer Park, and Poland Spring; Groupe Danone of France, owner of Evian; Suntory Water, with Crystal Springs; PepsiCo, with Aquafina; and Coca-Cola, with Dasani.

Vermont Pure, the eighth-largest U.S. bottled-water company, serves more than 85,000 home and office customers. It recently signed private-label deals with supermarket giants Royal Ahold and Hannaford Brothers. Vermont, now trading at 3.50, remains an "attractive acquisition candidate," says Taglich Brothers analyst Howard Halpern, who rates the stock a "speculative buy." The company's size and strong brand--plus its bottling facilities and own source of spring water--should attract a premium price in a buyout, says Halpern. "Danone and Suntory have been the most active in acquiring bottled-water companies," says Halpern, who notes that recent acquisitions have been valued at 10 to 15 times cash flow. He values Vermont at 14 times EBITDA (earnings before interest, taxes, depreciation, and amortization), or $7.85 a share.

One takeover investor, who values the company more highly--at $9 to $12 a share--says Vermont has already been approached by a suitor. The company's CEO did not return the call.

By Gene G. Marcial

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