Keurig Green Mountain Plans to Buy Dr Pepper Snapple


Under JAB’s ownership, Keurig improved its operations, Keurig’s chief executive, Bob Gamgort, said. He estimates that 20 percent of American households now have a Keurig machine. The company has also added partners for its K-Cup brewers and cut prices.

Mr. Gamgort and his counterpart at Dr Pepper Snapple, Larry Young, began discussing a deal several months ago. Uniting the two men was a belief in what Mr. Young called a “total beverage solution,” a combined company that could respond to the shifting tastes of consumers. Increasingly out is a taste for traditional sodas — where Dr Pepper still makes the majority of its sales — and in are healthier ready-to-drink beverages like tea and juices.

“We’re looking at the same insights and trends,” Mr. Gamgort said. “The way to win in this environment is to have a platform that satisfies all formats.”

Buying Dr Pepper Snapple would reintroduce Keurig to the market for soft drinks after an abbreviated, ill-fated move: Keurig shut down its Kold soda-at-home machine division in 2016 after less than a year amid weak sales.

Under the terms of the proposed transaction, Keurig would merge with Dr Pepper Snapple, creating a company called Keurig Dr Pepper. Shareholders in Dr Pepper Snapple would receive a cash dividend of $103.75 per share, about 8 percent higher than Dr Pepper Snapple’s closing share price on Friday.

The deal would bring Keurig back to the public markets — but under the control of JAB. Dr Pepper investors would own about 13 percent of the combined company, while Mondelez, which maintained a stake in Keurig, would hold another 13 percent.

“We have been very pleased with our coffee partnership with Keurig, and strongly support the strategic rationale for this transaction,” Dirk Van de Put, Mondelez’s chief executive, said in a statement.

Mr. Gamgort would remain chief executive at Keurig Dr Pepper, while Mr. Young would join the combined company’s board.

Keurig said that it expected to generate about $600 million in annual cost savings within three years, drawn from reduced spending on advertising and operations like warehousing and storage, and that it planned to significantly reduce its overall debt by that time.

While shares in Dr Pepper Snapple leapt about 24 percent in trading on Monday — a sign of hope among some investors that another suitor could emerge — Mr. Gamgort defended his company’s bid as fair and fully priced.

The transaction is expected to close by June 30, subject to approval by Dr Pepper Snapple shareholders and by regulators.

Though Mr. Gamgort and Mr. Young both said the immediate goal would be to concentrate on integrating the two companies, Mr. Gamgort did not rule out potential future acquisitions as a way to continue growing. Being public could help in that effort, since Keurig could use stock to help pay for acquisitions.

“There are all kinds of opportunities for us to continue to play in the world of consolidation,” Mr. Gamgort told analysts.

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