Dr Pepper Snapple Group, Inc. and Keurig Green Mountain, Inc. announced that the companies have entered into a definitive merger agreement to create Keurig Dr Pepper (“KDP”), in $18.7 billion deal.
Under the terms of the agreement, which has been unanimously approved by the Dr Pepper Snapple Board of Directors, Dr Pepper Snapple shareholders will receive $103.75 per share in a special cash dividend and retain 13% of the combined company.
KDP will have pro forma combined 2017 annual revenues of approximately $11 billion. This combination of two iconic beverage companies joins together beloved brands Dr Pepper, 7UP, Snapple, A&W, Mott’s and Sunkist with 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.
Larry Young, President and Chief Executive Officer 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.”
Keurig Green Mountain Inc., is part of JAB Holding Company, a food-and-beverage empire, which already includes Panera, Krispy Kreme Doughnuts and Caribou Coffee. The deal forges a path for JAB to be an acquirer and major distributor of drinks in the U.S.
Bob Gamgort, Chief Executive Officer of Keurig will lead the new company. Dr Pepper Snapple President and CEO Larry Young intends to transition to a role on KDP’s Board of Directors to help the new management team realize the full potential of the company.
“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. We are fortunate to have talented leadership teams within both companies, and I look forward to working together with the Dr Pepper Snapple team to make this combination a success for all of our stakeholders,” said Gamgort.
The Wall Street Journal reported that the deal would ramp up Keurig’s competition with Starbucks Corp., whose bottled drinks dominate the market and are distributed by PepsiCo Inc. Coca-Cola began distributing a line of Dunkin’ Donuts bottled iced coffee last year.
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.”
JAB Holding Company and its partners, will together make an equity investment of $9 billion as part of the financing of the transaction. Mondelēz International, JAB’s partner in Keurig, will hold an approximately 13-14% stake in the combined company.
Information provided by Business Wire