In one of the largest buyouts in the U.S. this year, Keurig Dr Pepper agreed to acquire the owner of Peet's Coffee in a deal valued at more than $18 billion. KDP plans to eventually split the two companies into two publicly traded companies.
KDP will pay Amsterdam-based JDE Peet's shareholders 31.85 euros, or about $37, per share in cash. The offer marks a 33% premium to JDE Peet's 90-day volume-weighted average stock price. That translates to a total price of 15.7 billion euros, or around $18.4 billion.
JAB had acquired Peet's in 2012 for about $1 billion. In 2015, JAB acquired San Francisco-based Mighty Tea and folded it into the Peet's brand.
The acquisition of Peet's will unlock incremental operating and financial benefits, KDP said. That includes some $400 million in cost synergies over three years and earnings accretion expected to start in the first year of the combination.
After the acquisition closes, KDP plans to separate into two U.S.-listed publicly traded companies. One will make soft drinks. The other aims for the title of the world's No. 1 pure-play coffee company, and will include the Keurig and Green Mountain Coffee Roasters brands.
KDP will spin off the coffee company, which has about $16 billion in combined annual net sales. It will reach more than 100 countries, including 40 in which it is already the No. 1 or No. 2 company by sales.
The remaining company, with more than $11 billion in annual sales, will be a major player in the $300 billion North American soft drink market. Its brands include Dr Pepper, Canada Dry, 7Up and energy labels.
Keurig Combines With Peet's Coffee
KDP owns Green Mountain Coffee Roasters and the line of Keurig coffee machines. In 2018, the company then known as Keurig Green Mountain agreed to buy Dr Pepper Snapple Group, combining into its present-day business.
European investment firm JAB Holding holds nearly 70% of the voting power at JDE Peet's. It also owns about 4% of Keurig Dr Pepper. The firm led the original Keurig-Dr Pepper merger, the Wall Street Journal — which first reported on the KDP-JDE talks — reported Monday.
Jefferies analyst Kaumil Gajrawala called the acquisition "a good deal," TheFly.com reported. A globally diversified operation makes sense with the coffee category innovating into new formats and channels. Plus, a stand-alone beverage business is likely to trade at a higher multiple. The firm has a buy rating and 41 price target on Keurig Dr Pepper.
By transaction size, the KDP-JDE Peet's deal would be the sixth-largest corporate buyout so far this year involving a U.S. company, according to data from S&P Global.
Keurig Dr Pepper stock fell more than 7% Monday morning. Shares are on pace for the largest decrease since March 16, 2020, when they fell 16.5%, according to Dow Jones Market Data. The stock has erased nearly all gains for the year. Shares were nearing a 36.12 buy point but sank to the bottom of a shallow base Monday, finding support around 32.
Keurig Dr Pepper has a Composite Rating of 65. The parent of Peet's Coffee does not trade in U.S. markets.
