Dr Pepper owner buys coffee chain Peet's in $18B deal
What's the story
Keurig Dr Pepper, a leading US beverage company, has announced its plan to acquire Dutch coffee and tea giant JDE Peet's in an $18 billion deal. The acquisition will see Keurig Dr Pepper pay €31.85 ($37.3) per share in cash, a 33% premium on the Dutch firm's 90-day volume-weighted average stock price. The total equity purchase amounts to €15.7 billion ($18.4 billion).
Strategic move
Strategic move to boost coffee business
The acquisition comes as a strategic move by Keurig Dr Pepper to boost its struggling coffee business. The company has been facing declining sales in its US coffee division, with a 0.2% drop to $900 million in Q2. This was due to a fall in shipments of single-serve coffee pods and Keurig coffee makers.
Future plans
Creation of new coffee company
After the acquisition, Keurig Dr Pepper plans to separate its beverage and coffee units into two distinct US-listed companies. This would reverse the 2018 merger between Keurig and Dr Pepper Snapple which created North America's third-largest beverage company with $11 billion in annual revenues. The new coffee company is expected to generate $16 billion in annual net sales under the leadership of Sudhanshu Priyadarshi, current CFO of Keurig Dr Pepper.
Leadership roles
Beverage firm post-separation
The beverage firm, post-separation, is expected to generate $11 billion in annual net sales and will be led by Tim Cofer, the current CEO of Keurig Dr Pepper. Meanwhile, Rafael Oliveira will continue as the CEO of JDE Peet's until the deal closes. The acquisition is expected to generate $400 million in cost synergies over three years.