Keurig Green Mountain Inc. and Dr. Pepper Snapple Group Inc. announced today that the two companies have entered into a merger creating Keurig Dr. Pepper (KDP) in an $18.7 billion deal. The acquisition is the latest by JAB Holding Co., Keurig’s Owner, in a string of acquisitions over a fire year period. JAB Holding Co has struck deals in the past, acquiring Panera Bread in April 2017 for more than $7 billion. The company has also struck deals with Krispy Kreme, Au Bon Pain and also controls several other coffee businesses.
The deal combines some of the most iconic sodas, teas and juices such as A&W, Dr Pepper, Hawaiian Punch and Sunkist with Keurig’s portfolio of products. The portfolio already consists of Green Mountain Coffee Roaster, their single serve coffee systems and 75+ license and partner brands. The new beverage company of scale has the capability to distribute to every point of sale in North America.
“We have a really wide portfolio of brands, we’re able to address almost every consumer need in every format and … to reach every point of sale,” said Keurig CEO Bob Gamgort.
“If you want to win in the beverage industry you need a portion of your portfolio that gives you significant scale and then you need to be able to layer in higher growth segments,” he said.
Under the agreement, shareholders of Dr Pepper Snapple will receive $103.75 per share in a cash dividend and will retain 13% of the new company.
Prior to the announcement of the deal, a 13% stake in Dr Pepper Snapple was worth just over $2.2 billion. The shares of the company jumped up 25% on Monday to $119.70. Keurig Dr Pepper will have an annual 2017 combined revenue of $11 billion.
The CEO of the combined company will be Bob Gamgort, current CEO of Keurig. The current CFO of Keurig, Ozan Dokmecioglu, will remain in the same position as well for the new company. CEO and President of Dr Pepper Snapple, Larry Young, will be transitioning to a new role on KDP’s board of directors in order to help the new management team.
Gamgort has stated the companies will still operate from the current locations. Dr Pepper Snapple operates out of Plano, Texas while Kuerig Green Mountain operates out of Waterbury, VT.
The newly combined companies expect cost-savings of $600 million in synergies by 2021 on an annual basis. They see an opportunity to expand the business in different ways, like selling coffee in vending machines and bottles. Their business models will be complemented by one another with Dr. Pepper’s direct to store delivery and Keurig’s online presence, along with their relationships with major supermarkets.