JAB Holding Co. made an announcement Monday that is sure to rock the food-and-beverage industry — it is taking ownership of Dr. Pepper in an $18.7 billion deal.
The food-and-beverage conglomerate already holds ownership over Caribou Coffee, Krispy Kreme Doughnuts and Keurig Green Mountain Inc., the business known for its automated coffee makers.
Keurig Green Mountain Inc. agreed on Monday to take over Dr. Pepper Snapple Group Inc., in an $18.7 billion that will see the total being paid in cash to shareholders.
As noted by Bloomberg, investors in the soft-drink giant will reportedly receive $103.7 per share while retaining roughly 13 percent of the combined venture, while Keurig Green Mountain investors will have 87 percent ownership of the new entity.
Dr. Pepper jumped up nearly 32 percent to $126.65 per share after the merger was made public. The climb was the largest “intraday rally” experienced by the company since its shares were made listed in 2008, according to Bloomberg.
The new conglomerate will be known as Keurig Dr. Pepper and will have an estimated annual revenue around $11 billion. This places JAB Holding Co. up with other beverage giants such as Coca-Cola Co. and PepsiCo Inc.
Twitter users took to the platform to post their thoughts on the merger.
Keurig Dr. Pepper brings with it a lineup of brands that includes: A&W root beer, Mott’s Apple Juice, 7Up lemon-lime soda, Snapple teas and Crush orange soda.
Bloomberg intelligence analyst Ken Shea praised the pragmatics of the deal, stating
“It’s a deal that makes a lot of strategic sense,” he said. “Once it gets going and they can deliver on some of the bold things they’re talking about here, this will be a really important benchmark that investors will use to compare Coke and Pepsi against.”
However, other analysts, such as Ali Dibadj from Sanford C. Bernstein & Co., are perplexed by the merger.
“We have yet to be fully convinced about the strategic rationale behind the merger,” Dibadj said Monday.
One major point of contention potentially lies with the specifics behind how the new entity will handle distribution.
As reported by Bloomberg, Dr. Pepper’s beverages were previously distributed through PepsiCo and Coca-Cola’s sales and bottling networks.
But, the new conglomerate could have a leg-up in the e-commerce department, as Keurig has strong relationships with tech sellers such as Amazon.com Inc. and Best Buy Co.
Combine this with Dr. Pepper’s already strong foundation with beverage vendors and convenience stores, and Keurig Dr. Pepper could be a force in the beverage industry.
“We have a really wide portfolio of brands, we’re able to address almost every consumer need in every format and … to reach every point of sale,” Bob Gamgort, Keurig Chief Executive, told Reuters.
He added: “If you want to win in the beverage industry you need a portion of your portfolio that gives you significant scale and then you need to be able to layer in higher growth segments.”
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