Keurig Green Mountain to buy Dr Pepper Snapple in $18.7 bn deal
30 Jan 2018
Leading US maker of personal beverage systems Keurig Green Mountain Inc yesterday struck a deal to buy soda maker Dr Pepper Snapple Group Inc for $18.7 billion.
Under the terms of the deal, Keurig, owned by Luxembourg-based JAB Holding Co, will pay a special dividend of $103.75 per share to Dr Pepper Snapple shareholders, or a total of $18.7 billion.
Dr Pepper Snapple shareholders will also retain a 13-per cent stake in the combined company to be called 'Keurig Dr Pepper', while Mondelez, which maintained a stake in Keurig, would hold another 13 per cent.
Keurig Dr Pepper expects to realize $600 million in synergies on an annualised basis by 2021.
Dr Pepper Snapple expects to pay its first quarter ordinary course dividend of $0.58 per share. At the close of the transaction, the company expects to deliver an annual dividend of $0.60 per share.
JAB Holding Company and its partners will together make an equity investment of $9 billion as part of the financing of the transaction and Chicago-based merchant bank BDT Capital Partners will also invest alongside JAB.
The remainder of the transaction financing will be provided through financing debt commitments from JPMorgan Chase Bank, Bank of America Merrill Lynch and Goldman Sachs.
The acquisition is expected to close by 30 June, subject to approval by Dr Pepper Snapple shareholders and regulators.
The deal, the biggest in the non-alcoholic beverage sector, will see Keurig Dr Pepper with annual revenues of around $11 billion and debt of more than $16 billion.
The combination of two iconic beverage companies will have brands like Dr Pepper, 7UP, Snapple, A&W, Mott's and Sunkist with leading coffee brand Green Mountain Coffee Roasters and Keurig single-serve coffee system, as well as more than 75 owned, licensed and partner brands in the Keurig system.
JAB, the holding company of the German billionaire Reimann family, has been on an acquisition spree in recent years.
It has acquired Au Bon Pain, Krispy Kreme, Panera Bread and Intelligentsia. It also acquired Keurig Green Mountain in 2016 for $13.9 billion and merged it with D. E. Master Blenders, a coffee business it had acquired from Mondelez International.
Larry Young, president and CEO of Dr Pepper Snapple, said, ''This transaction will deliver significant and immediate value to our shareholders, along with the opportunity to participate in the long-term upside potential of our combined company and attract new brands and beverage categories to our platform in a fast-changing industry landscape. We are excited to combine with Keurig to build on the rich heritage and expertise of both companies and provide the highest-quality hot and cold beverages to satisfy every consumer throughout the day.''
''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,'' said, Bob Gamgort, CEO of Keurig.
Bart Becht, partner and chairman of JAB Holding Company and chairman of Keurig, said, ''We are very excited about the prospect of KDP becoming a challenger in the beverage industry. Management's proven operational and integration track record along with their commitment to innovation and potential future brand consolidation opportunities, while maintaining an investment grade rating, positions the company well for long-term success and material shareholder value creation.''