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Monday, January 29, 2018

Dr Pepper Snapple (DPS) and Keurig Green Mountain to merge

  • JAB will acquire a Plano, Texas-based group best-known for sugary drinks, such as Dr Pepper, Snapple, A & W root beer and Sunkist orange soda. The group was spun off from Cadbury Schweppes in 2008.
  • Mondelez International, which partnered with JAB on its December 2015 takeover of Keurig, will own around 13 to 14 per cent of the combined group.
  • Germany's JAB Holding: owners of Keurig Green Mountain, Krispy Kreme, Panera Bread, Einstein Bros. Bagels, Caribou Coffee, Peet's Coffee & Tea, Mighty Leaf Tea, Jacobs Douwe Egberts.  About 20% of U.S. households use Keurig’s coffee-pod system. 
  • Update 7/15/18 below
** charts after announcement **


Dr Pepper Snapple and Keurig Green Mountain to merge -- DPS shareholders will receive $103.75/share in a special cash dividend and retain 13% of the combined company 
Keurig Dr Pepper will have pro forma combined 2017 annual revenues of approximately $11 billion. The company believes its complementary portfolio, access to high-growth segments of the beverage industry and shareholder value-focused management team will enable it to achieve sustained growth through continued innovation, brand consolidation opportunities and enhanced household penetration for its leading brands.
  • KDP targets realizing $600 million in synergies on an annualized basis by 2021. Dr Pepper Snapple expects to pay its first quarter ordinary course dividend of $0.58 per share. At the close of the transaction, the company expects to deliver an annual dividend of $0.60 per share.
  • The company will deliver strong cash flow generation and accelerate its deleveraging, with a target Net Debt/EBITDA of below 3.0x within two to three years after closing. KDP anticipates total net debt at closing to be approximately $16.6 billion and it anticipates maintaining an investment grade rating.
  • JAB Holding Company, a global investment firm with a proven track record of investing long-term capital in global consumer brands, and its partners, will together make an equity investment of $9 billion as part of the financing of the transaction. JAB will be investing equity capital from JAB Holding Company as well as through JAB Consumer Fund, an investment fund backed by a group of like-minded, long-term oriented investors. Both JAB Holding Company and JAB Consumer Fund are overseen by three senior partners: Peter Harf, Bart Becht and Olivier Goudet. Entities affiliated with BDT Capital Partners, a Chicago-based merchant bank that provides long-term private capital and advice to closely held companies, are also investing alongside JAB. Upon closing of the transaction, JAB will be the controlling shareholder. Mondelez International (MDLZ), JAB's partner in Keurig, will hold an approximately 13-14% stake in the combined company.
Update 7/15/18

Keurig Dr Pepper (KDP)

Keurig Dr Pepper's first week post-merger brings a defection, an acquisition and new volleys in coffee wars
  • Dr Pepper Snapple Group's this week closed its merger with Keurig Green Mountain.
  • The deal has cast uncertainty on Keurig Dr Pepper's so-called "Allied Brands," trendy drinks it distributes but does not own.
  • Fiji announced this week it will leave Keurig Dr Pepper's distribution network. Another Allied Brand, Big Red, this week signed an agreement to sell to KDP.
The deal, which closed Monday, creates a beverage giant with $11 billion in revenue that combines Dr Pepper Snapple's drink and distribution network with Keurig' Green Mountain's coffee business. The giant is backed by JAB Holding, the investment firm that has put together a coffee-fueled empire that already includes Krispy Kreme and Panera Bread.

This week's shake-up, though, is among brands far smaller than the iconic drinks for which both companies are named. Instead, it's within the collection of trendy beverages Keurig Dr Pepper distributes through its "Allied Brands" network. A sizable chunk of the company's revenue comes from distributing drinks made by other companies, including brands like Fiji Water, BodyArmor and Vita Coco.

The loss of Fiji, while minuscule to Keurig Dr Pepper's bottom line, is a bruise nonetheless.

The premium water brand is owned by privately held The Wonderful Co., the $4 billion owner of POM Wonderful pomegranate juices, Landmark Wines, Wonderful Almonds, and other trendy drinks and snacks.

Premium water is among the beverage industry's fastest-growing categories as consumers eschew sweeteners and artificial ingredients. It provided a balance to Dr Pepper Snapple's legacy portfolio of drinks dominated by sugary soda brands, like 7UP, A&W Root Beer and Crush.

** charts before  announcement **


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