* Jones CEO to step down
* Offer of 37 cents per Jones share, at 56 pct discount
* Jones shares down, Reed's up
(Recasts; adds comments, details, updates share movement)
By Nivedita Bhattacharjee
BANGALORE, March 9 Struggling soft drink maker
Jones Soda Co JSDA.O signed a letter of intent to be acquired
by Reed's Inc REED.O in a cash-and-stock deal that could
possibly end its year-long search for a buyer.
The offer from Reed's, which makes natural sodas and other
non-alcoholic drinks, values Jones at about $9.7 million, or 37
cents a share, based on Reed's Monday close of $1.58. That is a
discount of 56 percent to Jones' Monday close.
Even at a discount, this might be a good bet for Jones,
which has been reviewing strategic alternatives since February
2009, and had only managed to attract one suitor in December.
"Jones is a very small but very good brand... the deal
makes very good sense for both companies," said John Sicher,
the editor and publisher of industry publication Beverage
"I would expect that Reed's sees value in the Jones brand
and would continue to nurture and try to grow it."
Smaller players have found it tough to hold their own in
the cut-throat soft-drinks environment in the United States
that is dominated by bigwigs like Coca Cola Co (KO.N), Pepsico
Inc (PEP.N) and Dr Pepper Snapple Group Inc (DPS.N).
DEAL AT A DISCOUNT
The companies said Jones shareholders would receive 4.5
million shares of Reed's common stock and 10 cents per Jones
share in cash.
Reed's and Jones have until April 5 to negotiate a
definitive agreement on an exclusive basis.
Shares of Jones have plunged to 84 cents as of Monday's
close from a level above $20 reached in March 2007, when stock
commentator Jim Cramer touted the stock on his "Mad Money" show
on business cable channel CNBC.
In 2007, the company's chief executive resigned and the
Securities and Exchange Commission conducted an informal probe
of company officers for insider trading, though it ultimately
did not recommend enforcement action. A year later, Jones cut
38 percent of its workforce.
Seattle-based Jones, famed for its unusual flavors,
including mashed-potato flavored drinks, also said its current
chief executive, Joth Ricci, will be stepping down effective
"Over the past year we have taken numerous steps to reduce
our expenses and reinvigorate our top line in order to return
to profitability," Rick Eiswirth, chairman of Jones, said in a
"Unfortunately, the challenging economic environment
combined with our current capitalization has made it extremely
difficult to operate on a standalone basis."
Jones shares were trading down 38 percent at 52 cents,
while Reed's stock was up 6 percent at $1.67 Tuesday afternoon
(Reporting by Nivedita Bhattacharjee in Bangalore; Editing by
Aradhana Aravindan, Anne Pallivathuckal)