Shares of Dr Pepper Snapple Group (NYSE:DPS) skyrocketed to a new all-time high on Monday after it was announced that coffee giant Keurig Green Mountain is set to purchase the beverage maker.
The deal will see Dr Pepper shareholders receive $103.75 per share in a special cash dividend and retain 13% of the combined company. Dr Pepper Snapple shares closed Friday at $95.65 and surged over 30% on Monday to hit $126.63 following the announcement.
The new company, Keurig Dr Pepper, hopes to better compete against the likes of PepsiCo (NASDAQ:PEP) , Coca-Cola (NYSE:KO) , Dunkin' Brands (NASDAQ:DNKN) , and Starbucks Corporation (NASDAQ:SBUX) . This merger also comes at a time when soda companies are trying to diversify their portfolios as consumers shift away from sugary drinks.
European investment fund JAB Holding helped take Keurig private for $13.9 billion in 2016. This merger will see JAB become the controlling shareholder of Keurig Dr Pepper, while snack giant Mondelez International (MDLZ) will hold a roughly 13% to 14% stake in the new company.
The companies posted $11 billion in combined sales during 2017. Management from both firms hope that Keurig Dr Pepper, with its portfolio of brands including 7UP, A&W root beer, and the widely-popular single-serve coffee systems, will be able to offer “unrivaled distribution capability to reach virtually every point-of-sale in North America.”
“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,” Keurig CEO Bob Gamgort said in a statement.
The companies noted that they expect to create $600 million of annual savings by 2021. This merger comes as soda companies face more pressure to offer healthier options. Before this deal, Dr Pepper had been one of the slowest soda companies to begin to diversify its offerings. Soft drinks still accounted for about 80% of its annual revenue in 2016.
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Coca-Cola Company (The) (KO): Free Stock Analysis Report
Dr Pepper Snapple Group, Inc (DPS): Free Stock Analysis Report
Pepsico, Inc. (PEP): Free Stock Analysis Report
Starbucks Corporation (SBUX): Free Stock Analysis Report
Dunkin' Brands Group, Inc. (DNKN): Free Stock Analysis Report
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