On Monday, beverage company Keurig Green Mountain announced plan to acquire Dr. Pepper Snapple Group, Inc. (NYSE: DPS). The deal would create a new beverage powerhouse with $11 billion in combined sales. Furthermore, the merger will be supported by an Austrian investment firm by the name of JAB Holdings.
This deal is just the latest in a flurry of buyouts by JAB Holdings in the past few years. The firm has several companies among their holdings, such as Panera Bread, Krispy Kreme, and Caribou Coffee. JAB Holdings purchased Keurig in 2016.
One thing JAB will be doing differently during this merger is keeping Dr. Pepper Snapple partially public. They plan to leave the company 13% public, and acquire the remaining 87% of the company’s shares. In addition, Dr. Pepper Snapple Group shareholders will be receiving a dividend of $103.75 per share. The news caused Dr. Pepper Snapple shares to rise 25% Monday morning.
Keurig CEO Bob Gamgort says the acquisition may not be “intuitive” at first. The two companies take a different approach to selling beverages. Keurig Green mountain sells beverage machines, as well as “K-cups” used in the machines to make single serve drinks. Meanwhile, Dr. Pepper Snapple bottles and distributes their sodas and juices to stores.
The merger will give Keurig rights to Dr. Pepper’s wide range of brands. The company’s repertoire extends beyond the recognizable Dr. Pepper and Snapple brands. It also includes Hawaiian Punch, Mott’s Juices, 7up, and Canada Dry ginger ale. In 2016, Dr. Pepper Snapple also acquired Bai Brands for $1.7 billion. Bai Brands is a maker of antioxidant drinks, which may appeal to more health-oriented consumers.
In addition to acquiring their brands the merger gives Keurig access to Dr. Pepper’s logistics system. Their distribution system is just one of three major beverage distributors in the United States. This gives Keurig the potential to make their products more available to consumers. The company is currently attempting to expand their online presence. Gamgort states this will allow both companies products to be “anywhere consumers are shopping.”
The merger is not yet guaranteed. Dr. Pepper Snapple shareholders retain their right to vote on the decision. Should the acquisition be approved, it is expected to close during the second quarter 2018.
Article By: Frank Marino-Moore
