Keurig’s Acquisition of Dr Pepper Snapple
The popular coffee company Keurig is set to acquire Dr Pepper Snapple, a merger that will combine two popular beverage brands in an effort to increase sales and revenue. According to Dealogic, the deal is the largest non-alcoholic drinks agreement on record and would pay almost $19 billion in cash to Dr Pepper Snapple investors. In merging the two, Keurig and Dr Pepper Snapple would become a single company with around $11 billion in annual sales and over $16 billion in debt.
Both Keurig and Dr Pepper Snapple have experienced slow growth among competition from their respective rival companies, and this transaction would allow Keurig to put bottled coffee in more stores and end up with $600 million in annual savings. The chief executives at Keurig and Dr Pepper Snapple, Bob Gamgort and Larry Young respectively, believe that uniting the brands would result in a “total beverage solution” and a way to adapt to constant shifts in taste by consumers. However, the deal has raised questions among analysts, some of whom think that the companies would have been able to achieve their goals even without combining the two.
This transaction is being run by JAB Holding Company, one of Europe’s largest investment firms. JAB is striving to create a food-and-coffee empire and has spent over $40 billion over the last 10 years in deals to take control of coffee and restaurant brands around the US, such as Peet’s Coffee, Panera Bread, and Krispy Kreme Doughnuts. The investment firm acquired Keurig two years ago in a $13.9 billion deal.
The merger between Keurig and Dr Pepper Snapple would give JAB control of a public company that it would be able to use to make other deals and raise the profiles of its other brands, according to analysts. Both companies have strengths that could be used to benefit the other. Keurig would use Dr Pepper’s distribution network to market various drinks, and Dr Pepper would be able to sell more drinks through online retailers like Amazon due to Keurig’s influential online presence.
Both chief executives have said that their first priority would be integrating Keurig and Dr Pepper Snapple, but Mr. Gamgort, who will be running the joint company, has said that he would also consider future acquisitions in order to continue growing. The deal is set to close by June 30.