Keurig Green Mountain has announced it will acquire Dr Pepper Snapple in a move that will create a drinks conglomerate with $11 billion in annual revenue.
This combination of two beverage companies into one entity, which will be called Keurig Dr Pepper (KDP), joins together brands such as Dr Pepper, 7UP, Snapple, A&W, Mott’s and Sunkist with coffee brand Green Mountain Coffee Roasters and the Keurig single-serve coffee system.
Dr Pepper Snapple shareholders will be paid a cash dividend of $103.75 per share and will own 13% of the combined company. Germany’s JAB Holding Company, which owns a controlling stake in Keurig, will own the remaining 87%.
Keurig Green Mountain and Dr Pepper Snapple said that KDP will be a “company of scale with a portfolio of iconic consumer brands and unrivaled distribution capability to reach virtually every point-of-sale in North America”.
JAB, which bought Keurig Green Mountain in 2015, said it will make an equity investment of $9 billion as part of the financing of the transaction.
The move sees JAB compete directly with Coca-Cola and PepsiCo in the soft drinks sector. In 2016, it bought all the shares of doughnut chain Krispy Kreme for a total value of $1.35 billion.
JAB chairman Bart Becht said he was “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.”
Bob Gamgort, current CEO of Keurig, will serve as CEO of the combined company and Ozan Dokmecioglu, current Keurig CFO, will serve as its CFO. Dr Pepper Snapple CEO Larry Young intends to transition to a role on KDP’s board of directors.
Keurig and Dr Pepper Snapple will continue to operate out of their current locations and Bob Gamgort will be based in Burlington, Massachusetts.
Gamgort said: “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.
“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.”
Larry Young added: “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.”
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