Keurig Dr Pepper (KDP) and JDE Peet’s announced they have entered into a definitive agreement under which KDP will acquire the multi-national coffee and tea business in an all-cash transaction, after which Keurig Dr Pepper will split into two companies.
After the acquisition closes, Keurig Dr Pepper plans to separate into two independent, United States-listed publicly traded companies: Global Coffee Co. and Beverage Co.
As announced, Global Coffee Co., with $16 billion in combined annual net sales, will become the world’s largest pure-play coffee company. With operations across more than 100 countries, including 40 in which the company holds the number-one or number-two market position by sales, Global Coffee will compete across all coffee segments, channels and price points. With an ability to rapidly scale ideas, strong profitability and robust cash generation, Global Coffee will be positioned to deliver attractive, predictable growth, enhanced by steady cash returns. Global Coffee will include the Keurig coffee maker operation, a KDP spokesperson confirmed.
Beverage Co. will operate in the North American refreshment beverages market with more than $11 billion in annual net sales and a portfolio of well recognized and emerging brands. It will emerge as a differentiated and expanding direct-store-delivery system with a capital-efficient growth model, according to KDP. Beverage Co. will benefit from multiple drivers to continue to compete in a vast and fragmented sector, the company added. Strong free cash flow will support a dynamic approach to capital allocation and enhance optionality, as stated in the announcement.
Under the terms of the transaction, KDP will pay JDE Peet’s shareholders Euro 31.85 per share in cash, or $37.20 at current exchange rates, a 33% premium to JDE Peet’s 90-day volume-weighted average share price, representing a total equity consideration of Euro 15.7 billion, or $18.34 billion. JDE Peet’s will also pay a previously declared dividend of Euro 36 cents per share, or 42 cents U.S., before the closing with no reduction to the offer price.
Keurig Dr Pepper and JDE Peet’s offered several points to their strategic rationale for the merger:
- Singular opportunity to establish a global coffee leader by combining KDP’s next-generation coffee innovations and single-serve leadership with JDE Peet’s nearly 300-year legacy, global reach and portfolio of brands.
- Acquisition of JDE Peet’s is expected to deliver compelling synergies and significant value for KDP shareholders.
- Planned separation via a tax-free spin-off of Global Coffee, will position it and Beverage Co. to win in their respective markets by leveraging operating models optimized to unique category dynamics.
- Create two strategically focused, scaled beverage companies with differentiated shareholder value propositions that feature distinct growth and capital allocation frameworks designed to deliver sustained and compelling long-term value.
- The JDE Peet’s acquisition will enhance KDP’s coffee positioning, creating a strong, resilient and diversified global portfolio, unlocking incremental operating and financial benefits that include $400 million in anticipated cost synergies and earnings per share accretion.
After execution of the corporate split, Tim Cofer, KDP CEO, will become CEO of Beverage Co.; and Sudhanshu Priyadarshi, KDP president and CFO, international, will become CEO of Global Coffee Co.
“Today’s announcement marks a transformational moment in the beverage industry, as we build on KDP’s disruptive legacy by creating two winning companies, including a new global coffee champion,” Cofer said. “Through the complementary combination of Keurig and JDE Peet’s, we are seizing an exceptional opportunity to create a global coffee giant. This is the right time for this transaction, with KDP in a position of operational and financial strength, momentum across our evolved portfolio, and increasing coffee category resilience. By creating two sharply focused beverage companies with attractive and tailored growth propositions and capital allocation strategies, we are poised to generate significant shareholder value in both the near and long term.”
