Keurig Snaps up Dr Pepper Snapple for $18.9B

The deal is the latest step by Keurig's investment fund parent to build a food and beverage force to rival Coke and Pepsi.
Matthew HellerJanuary 29, 2018

The investment arm of Germany’s Reimann family is taking another major step toward expanding its food and beverage empire by acquiring Dr Pepper Snapple in the largest soft-drink deal ever.

JAB Holding Co. took control of Keurig Green Mountain two years ago and has spent more than $40 billion over the past decade to acquire coffee and U.S. restaurant brands, including Peet’s Coffee, Panera Bread, and Krispy Kreme Doughnuts.

Under JAB’s latest deal, Keurig will merge with Dr Pepper Snapple to create a new public company called Keurig Dr Pepper (KDP), with Dr Pepper Snapple shareholders receiving $103.75 per share in a special cash dividend and retaining 13% of the combined company. JAB will be the controlling shareholder.

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The deal is estimated to be worth $18.9 billion, excluding debt, according to Dealogic, which said it would top the previous record for a soft-drink acquisition — JAB’s takeover of Keurig for $13.9 billion.

The new Keurig Dr Pepper, with pro forma combined 2017 annual revenue of about $11 billion, is still well behind the much larger Coke and Pepsi. Dr Pepper has about 8.5% of the U.S. non-alcoholic beverage market, according to Euromonitor International.

But as The Wall Street Journal reports, “The combination gives Keurig, best known for its K-Cup coffee systems, an express lane to get its bottled coffee drinks into coolers at convenience stores, drugstores and other retailers at a time when ready-to-drink coffee sales are growing rapidly.”

The brands that will be part of KDP include Dr Pepper, 7UP, Snapple, A&W, Mott’s and Sunkist along with Keurig’s Green Mountain Coffee Roasters. “It’s always been a two-horse race with Coke and Pepsi,” Macquarie analyst Caroline Levy told the WSJ. “I wouldn’t be surprised to see this entity pull ahead of Pepsi in the beverage business.”

Analysts also noted that because KDP will be a public company, it could provide JAB with easier access to cash for more acquisitions down the road.

“We think the public listing … is the main reason for the deal,” said Susquehanna Financial Group analyst Pablo Zuanic.