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Dr Pepper Snapple Group to merge with Keurig Green Mountain

January 29, 2018

Dr Pepper Snapple Group Inc. and Keurig Green Mountain Inc. have entered into a definitive merger agreement to create Keurig Dr Pepper, a new beverage company of scale with a portfolio of iconic consumer brands and unrivaled distribution capability to reach virtually every point-of-sale in North America, according to a press release.

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 percent of the combined company.

KDP will have pro forma combined 2017 annual revenues of approximately $11 billion. This combination of two iconic beverage companies joins 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," Larry Young, president and chief executive officer of Dr Pepper Snapple, said in the press release. "We are excited to combine with Keurig to build on the rich heritage and expertise of both companies and provide the highest-quality hot and cold beverages to satisfy every consumer throughout the day."

"Our view of the industry through the lens of consumer needs, versus traditional manufacturer-defined segments, unlocks the opportunity to combine hot and cold beverages and create a platform to increase exposure to high-growth formats," said Bob Gamgort, chief executive officer of Keurig. "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. We are fortunate to have talented leadership teams within both companies, and I look forward to working together with the Dr Pepper Snapple team to make this combination a success for all of our stakeholders." 

Since becoming a private company following its acquisition by a JAB-led investor group in March 2016, Keurig has renewed its marketing investment and improved its new brewer innovation pipeline, which has resulted in renewed top-line volume growth, increasing U.S. household penetration for Keurig brewers to 20 percent from 17 percent in the last two years.

In the same period, Keurig has added key brand partners into the Keurig system with the help of strategic pod price reductions and value added services. The combination of those two factors has allowed the company to improve its pod growth from the low single digits to mid-single digits in the second half of calendar year 2017.

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.