USA – US soft beverages company Dr Pepper Snapple Group has been bought by Keurig Green Mountain, a specialty coffee and single serve brewing systems company, in a bid to form a beverage giant that brings together the two companies hot and cold beverage portfolios.
The new beverage company, Keurig Dr Pepper (KDP), will deliver scale with a portfolio of consumer brands and unrivaled distribution capability in North America, say the two companies.
Shareholders of Dr Pepper Snapple Group, makers of Dr Pepper, 7 Up, Snapple and Sunkist beverage brands will take a 13% stake in the new company, with its shareholders receiving a U$103.75 per share special cash dividend.
Keurig Green Mountain shareholders will hold 87% at the end of the transaction.
Keurig Green Mountain, bought out by leading private equity fund JAB Holding two years ago is the owner of leading coffee brand Green Mountain Coffee Roasters and the innovative Keurig single-serve coffee system, as well as more than 75 owned, licensed and partner brands in the Keurig system.
“Our view of the industry through the lens of consumer needs, versus traditional manufacturer-defined segments, unlocks the opportunity to combine hot and cold beverages and create a platform to increase exposure to high-growth formats,” said Bob Gamgort, Chief Executive Officer of Keurig.
“The combination of Dr Pepper Snapple and Keurig will create a new scale beverage company which addresses today’s consumer needs, with a powerful platform of consumer brands and an unparalleled distribution capability to reach virtually every consumer, everywhere.”
KDP will have pro forma combined 2017 annual revenues of approximately US$11 billion.
The deal raises ‘the prospect of KDP becoming a challenger in the beverage industry’, says Bart Becht, Partner and Chairman of JAB Holding Company and Chairman of Keurig, in a fast chaging industry landscape.
Mondelēz International, JAB’s partner in Keurig, will hold 13-14% stake in the combined company, with the company ‘very pleased with our coffee partnership with Keurig, and strongly support the strategic rationale for this transaction’, says Dirk Van de Put, CEO of Mondelēz International.
The new company’s complementary portfolio, access to high-growth segments of the beverage industry and shareholder value-focused management team will enable it to achieve sustained growth through continued innovation, brand consolidation opportunities and enhanced household penetration for its leading brands, say the companies.
It targets realizing US$600 million in synergies on an annualized basis by 2021.
The transaction adds to a growing list of companies that have been bought in the recent past by JAB Holdings, as it strives to be a major player in the FMCG space, challenging such majors as Nestle and Pepsi Cola.
JAB Holdings also acquired Peet’s Coffee and Tea brand in 2014. It also grabbed Mighty Leaf Tea, a specialty tea retailer in the US in August 2014
In October 2015, Peet’s Coffee & Tea bought a controlling stake in Intelligentsia Coffee & Tea, a Chicago based coffee retailer. It also acquired Stump Town Coffee in Oregon, USA.
The company acquired Keurig Green Mountain for US$13.9 billion dollars in March 2016 as part of a group of investors, and has since grown its top-line volume, increasing U.S. household penetration for Keurig brewers to 20%, from 17%, in the last two years.
The company also acquired US doughnut retailer Krispy Kreme for US$1.35 billion in May 2016, followed by that of Panera Bread, a fast casual bakery-café chain was then acquired in April 2017 for US$7.5 billion. In August 2017, JAB then bought Bruegger’s Bagels.
German JAB Holding and its partners will together make an equity investment of US$9 billion as part of the financing of the transaction.
Entities affiliated with BDT Capital Partners, a Chicago-based merchant bank are also investing alongside JAB.
Upon closing of the transaction, JAB Holdings will be the controlling shareholder.
The transaction is not subject to a financing condition and is expected to close in the second calendar quarter of 2018, subject to the approval of Dr Pepper Snapple shareholders and the receipt of regulatory approvals.
Bob Gamgort, current chief executive officer of Keurig, will serve as CEO of the combined company and Ozan Dokmecioglu, current chief financial officer of Keurig, will serve as its chief financial officer.
Dr Pepper Snapple President and CEO Larry Young will join KDP’s Board of Directors, while Bart Becht, of JAB, will serve as Chairman of the company’s Board of Directors
Keurig and Dr Pepper Snapple will continue to operate out of their current locations and Bob Gamgort, CEO of the combined company, will be based in the USA.