FDBusiness.com

Dr Pepper Snapple Group, a leading producer of flavoured beverages in North America and the Caribbean, and Keurig Green Mountain, a leader in specialty coffee and innovative single serve brewing systems, have agreed to merge to create Keurig Dr Pepper (KDP), a new beverage company of scale with a portfolio of iconic consumer brands and unrivaled distribution capability to reach virtually every point-of-sale in North America.

KDP will have pro forma combined 2017 annual revenues of approximately $11 billion. This combination of two iconic beverage companies joins together popular 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. KDP targets realizing $600 million in synergies on an annualized basis by 2021.

Under the terms of the merger agreement, Dr Pepper Snapple shareholders will receive a special cash dividend of $103.75 per share and will retain their shares in Dr Pepper Snapple. Upon closing of the transaction, Keurig shareholders will hold 87% and Dr Pepper Snapple shareholders will hold 13% of the combined company.

JAB Holding Company, a global investment firm, will make an equity investment of $9 billion as part of the financing of the transaction. Upon closing of the transaction, JAB will be the controlling shareholder. Mondelēz International, JAB’s partner in Keurig, will hold an approximately 13-14% stake in the combined company.

Larry Young, President and Chief Executive Officer of Dr Pepper Snapple, says: “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.”

Bob Gamgort, Chief Executive Officer of Keurig, says: “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.”

Dirk Van de Put, CEO of Mondelēz International, which will have a significant stake in KDP, comments: “We have been very pleased with our coffee partnership with Keurig, and strongly support the strategic rationale for this transaction. We look forward to continuing to participate in the compelling value-creation and long-term growth opportunities inherent in this powerful beverage platform.”