01/29/2018

Keurig Green Mountain Inc will buy soda maker Dr Pepper Snapple Group Inc in a deal worth more than $21 billion, bringing the world’s biggest single-serve coffee brand, K-Cup, and beverages such as 7UP, Snapple and Sunkist under one roof.

The deal is the latest stage of a five-year old push into the U.S. food and beverage market by Germany’s JAB Holding Co, and unifies two strong retail distribution networks.

JAB took Keurig owner Green Mountain Coffee Roasters private in 2016, swallowed a part of Mondelez’s international coffee business a year earlier and has bought restaurant chains Krispy Kreme and Panera Bread Co.

Keurig and Dr Pepper Snapple did not give an overall value for the transaction but, including an $18.7 billion cash payout and a 13 percent stake in Dr Pepper Snapple, Thomson Reuters calculations put the value of the deal in excess of $21 billion.

Shareholders will receive $103.75 per Dr Pepper Snapple share as a special cash dividend and own 13 percent of the combined company, which will be called ‘Keurig Dr Pepper’ and will be publicly traded, the companies said. JAB will be the controlling shareholder of the new company, while Keurig shareholder Mondelez will own about 13-14 percent.

Shares of Dr Pepper jumped 32 percent to a record-high $126.14 in early trading. The company had a market capitalization of $17.3 billion as of Friday’s close.

Keurig Chief Executive Bob Gamgort and Chief Financial Officer Ozan Dokmecioglu will continue in the same roles at the combined company.

The companies said the deal would merge Dr Pepper Snapple’s direct-to-store delivery model (DSD), which services smaller stores, with Keurig’s strong relationships with online players and major supermarket and national chains.

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“Together with our enhanced distribution scale, we will have even greater ability to reach nearly all consumers at virtually every point of sale,” the companies said.

“Combined, we will create a top-tier beverage distribution system in North America with strong exposure to faster growth beverage categories.”

The new company expects total net debt at closing, expected in the second quarter, to be about $16.6 billion.

Keurig Green Mountain was taken private by a JAB-led investor group, that included Mondelez, for about $13.9 billion in 2016. That deal created a global coffee giant that set its sights to take on industry leader Nestle.

Goldman Sachs was the lead financial adviser to Keurig and Credit Suisse advised Dr Pepper Snapple on the deal.

Reuters( Reporting by Siddharth Cavale and Sangameswaran S in Bengaluru; Editing by Patrick Graham and Saumyadeb Chakrabarty)