As part of the transaction, DPSG received a one-time cash payment of $715m before taxes, fees and other related expenses. The company expects to use a portion of the proceeds to support its ongoing share repurchase programme.
“These agreements solidify Coke’s support of the Dr Pepper trademark and the continued growth of the brand and our flavour portfolio,” said Larry Young, president and CEO of DPSG.
Under the new licensing agreements, Coca-Cola will distribute Dr Pepper in the US and Canada Dry in the northeast US, where these brands were formerly distributed by Coca-Cola Enterprises (CCE). In addition, Coke will offer Dr Pepper and Diet Dr Pepper in local fountain accounts formerly serviced by CCE, and will include Dr Pepper and Diet Dr Pepper on its ‘Freestyle’ fountain dispenser.
The new agreements have an initial term of 20 years, with 20-year renewal periods, and require The Coca-Cola Company to meet certain performance conditions. Coke will continue to distribute Canada Dry, C’Plus and Schweppes in Canada.
Additionally, in certain US territories where it has a manufacturing and distribution footprint, DPSG will begin selling Squirt, Canada Dry, Schweppes and Cactus Cooler, which were formerly sold by CCE.
The cash payment will be recorded as deferred revenue and recognised as net sales over the estimated 25-year life of the customer relationship.
Source: Dr Pepper Snapple Group
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