0.Keurig Green Mountain, the maker of coffee pod machines, said on Monday that it planned to buy the Dr Pepper Snapple Group in an $18.7 billion deal that would create a giant whose products run from instant coffee to soft drinks.
The deal is the latest orchestrated by JAB Holding Company, the investment firm that has quickly amassed a global coffee-based empire that includes Keurig, Peet’s and Krispy Kreme. With the acquisition of Dr Pepper Snapple, Keurig would gain a much wider distribution network, as well as well-known brands like Dr Pepper, 7Up and Snapple.
The transaction also raises the possibility of Dr Pepper Snapple’s brands eventually producing pods to let consumers produce their soft drinks at home.
“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,” Bob Gamgort, Keurig’s chief executive, said in a statement.
Under the terms of the proposed transaction, Keurig would merge with Dr Pepper Snapple, creating a new company to be called Keurig Dr Pepper. Shareholders in Dr Pepper Snapple would receive a cash dividend of $103.75 per share, about 8 percent higher than Dr Pepper Snapple’s closing share price on Friday.
Keurig’s current shareholders would own about 87 percent of the combined company, with Dr Pepper Snapple investors owning the remainder. JAB would be the biggest stock owner if the deal were to complete, with Mondelez International, the snack food company that had been a minority investor in Keurig, holding a 13 percent stake.
“We have been very pleased with our coffee partnership with Keurig, and strongly support the strategic rationale for this transaction,” Dirk Van de Put, Mondelez’s chief executive, said in a statement.
Shares in Dr Pepper Snapple leapt nearly 33 percent in premarket trading on Monday, a sign of hope among some investors that another suitor for the soft-drink company could emerge.
Mr. Gamgort would remain chief executive at Keurig Dr Pepper. His counterpart at Dr Pepper Snapple, Larry Young, would become a director of the combined company.
Keurig said that it expected to generate about $600 million in annual cost savings within three years, and that it planned to significantly reduce its overall debt by that time.
The transaction is expected to close by June 30, subject to approval by Dr Pepper Snapple shareholders and by regulators.