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. Last Updated: 07/27/2016

Nestle Snaps Up Expat-Founded Clearwater

Nestle announced Wednesday it has purchased 100 percent of Clearwater, putting the Swiss food and beverage giant atop the country's rapidly expanding water-delivery market.

The deal is Nestle's second Russian water acquisition in the last seven months, having bought bottled-water and delivery company Saint Springs for about $50 million last July.

Neither company would comment on the value of the deal, though analysts, basing their calculations on last year's purchase of Saint Springs, said Clearwater probably cost between $25 million and $40 million.

Scott Nicol, an American expatriate who founded Clearwater with a $70,000 loan from his father in 1993, would not comment on the deal, citing a "gentlemen's agreement" between the parties.

Hubert Genieys, a spokesman for Nestle Waters, the company's water division, said the deal was in line with Nestle's aggressive European expansion policy.

"It's a young and dynamic market, and Russia is the most populated country in Europe," he said by telephone from Paris. "For us, it's a very important and strategic acquisition."

With more than 40,000 clients, mostly in Moscow and St. Petersburg, Clearwater gives Nestle a strong base in Russia's water-delivery market, said Mary Gamzian, marketing manager for Clearwater.

Alexei Krivoshapko, an analyst at United Financial Group, put the size of the water-delivery market at about $40 million last year, or some 130 million liters, about 10 percent of Russia's total water market.

Some 25 percent of Saint Spring's revenues come from deliveries to 20,000 clients. Companies make up 70 percent of all water-delivery clients, Gamzian said. In Moscow, 30 percent of all offices have bottled water, compared with 90 percent in the United States.

Nicol started up Clearwater out of a small Moscow apartment. In 2001, he opened a bottling factory and distribution center outside the city with the capacity to supply up to 120,000 clients in the greater Moscow area.

King Water, which claims to be the second-largest water-delivery company in Moscow -- though analysts place it third -- said the deal "could have been expected."

Boris Yelenich, marketing manager for King Water, said "time would tell" whether or not his company would change its tactics with the arrival of Clearwater's powerful new owner.

Analysts said the purchase of Clearwater, the market leader, was logical for Nestle.

Natalya Zagvozdina, an analyst with Renaissance Capital, said if the Saint Springs deal was taken as a benchmark, Clearwater would have cost about $35 million given expected revenues this year of 15 million euros ($16.11 million).

"For Nestle this is a very sensible purchase," Zagvozdina said. "They have gotten rid of the competition and acquired another good brand."

Nestle likely will keep both Clearwater and Saint Springs, though "they will probably pour it from the same barrel," she said.

Krivoshapko put the price lower, at about $25 million, based on earnings before interest, taxation, depreciation and amortization of about $4 million.

Yakov Sadchikov, author of the RussiaDeal weekly business newsletter, said given Clearwater's potential output and leading position on the market, Nestle probably paid closer to $40 million.

Nicol declined to comment on his future at Clearwater.

"Regarding Scott Nicol, we have not decided what we are going to do with him," Genieys said.

Sveta Graudt contributed to this report.