PLANO, Texas, and BURLINGTON, Mass. -- The perennial third-place beverage manufacturer in the United States is ready to step up its game. With its merger this week with Keurig Green Mountain, Dr Pepper Snapple Group sees the new company as "a new challenger in the beverage industry."
"The combination of Dr Pepper Snapple and Keurig will create a new scale beverage company which addresses today’s consumer needs with a powerful platform of consumer brands and an unparalleled distribution capability to reach virtually every consumer, everywhere," said Bob Gamgort, CEO of Keurig and CEO of the new combined company Keurig Dr Pepper (KDP).
Here's a look at the deal and how it might affect the beverage landscape ...
In a deal estimated to be worth $18.7 billion, Dr Pepper Snapple Group Inc. and Keurig Green Mountain Inc.—and its parent company JAB Holding Co.—announced Jan. 29 that the companies have entered into a definitive merger agreement to create "a new beverage company of scale with a portfolio of iconic consumer brands and distribution capability to reach virtually every point-of-sale in North America."
Under the terms of the agreement, which has been unanimously approved by the Dr Pepper Snapple board of directors, Dr Pepper Snapple shareholders will receive $103.75 per share in a special cash dividend and retain 13% of the combined company.
With 2017 annual revenues of approximately $11 billion, the combination of the two beverage companies brings together brands Dr Pepper, 7UP, Snapple, A&W, Mott’s and Sunkist with coffee brand Green Mountain Coffee Roasters and the Keurig single-serve coffee system, as well as more than 75 owned, licensed and partner brands in the Keurig system.
“This transaction will deliver significant and immediate value to our shareholders, along with the opportunity to participate in the long-term upside potential of our combined company and attract new brands and beverage categories to our platform in a fast-changing industry landscape," said Larry Young, president and CEO of Dr Pepper Snapple.
"I can say with confidence that the immediate and long-term possibilities that this merger is going to bring to our shareholders ... is tremendous," he said during a conference call about the merger. "I know our great business is safe and secure and positioned for growth. ... The combined company will be open for growth across the entire beverage space."
Young will transition to a role on KDP’s board of directors to help the new management team. Gamgort will be CEO of the combined company, and Ozan Dokmecioglu, current chief financial officer of Keurig, will serve as its chief financial officer.
“Our view of the industry through the lens of consumer needs, vs. traditional manufacturer-defined segments, unlocks the opportunity to combine hot and cold beverages and create a platform to increase exposure to high-growth formats," Gambort said.
Bart Becht, partner and chairman of JAB Holding Co. and chairman of Keurig, suggested the new company will aim squarely at No. 1 and 2 beverage companies Coca-Cola Co. and PepsiCo through its growth and development.
“We are very excited about the prospect of KDP becoming a challenger in the beverage industry,” he said. “Management’s proven operational and integration track record along with their commitment to innovation and potential future brand consolidation opportunities, while maintaining an investment grade rating, positions the company well for long-term success and material shareholder value creation.”
Dirk Van de Put, CEO of Mondelez International, which will have a significant stake in KDP, said, “We have been very pleased with our coffee partnership with Keurig and strongly support the strategic rationale for this transaction.”
Waterbury, Vt.-based Keurig Green Mountain Inc. is a leader in specialty coffee and single-serve brewing systems. It is owned by JAB Holding Co., a Burlington, Mass.-based conglomerate that invests in companies with premium brands, attractive growth and strong margin dynamics in the consumer goods category.
Dr Pepper Snapple Group is a leading producer of beverages in North America. The Plano, Texas-based company owns seven of the top 10 noncola soft drinks.