US-listed Keurig Dr Pepper has agreed to buy Dutch company JDE Peet's for €15.7 billion in cash, aiming to establish a global coffee champion in the face of growing trade challenges.
Under the terms of the deal, the maker of 7UP and Dr Pepper sodas will offer €31.85 for each JDE Peet's share, representing around a 20% premium on the Dutch company's closing market price on Friday.
The deal, billed as one of Europe's largest acquisitions in over two years, proposes splitting the merged entity’s coffee operations and other beverage businesses into two separate publicly listed companies.
The transaction, which comes amid intense corporate finance activity in the consumer goods sector, would partly reverse a 2018 merger that created Keurig Dr Pepper by combining Keurig Green Mountain and Dr Pepper Snapple.
Shares of JDE Peet's surged 18% in early trading, marking their strongest day on record, while Frankfurt-listed shares of Keurig Dr Pepper fell 1.3%.
"Through the complementary combination of Keurig and JDE Peet's, we are seizing an exceptional opportunity to create a global coffee giant," Keurig Dr Pepper CEO Tim Cofer said in a statement.
"This is the right time for this transaction, with KDP in a position of operational and financial strength, momentum across our evolved portfolio, and increasing coffee category resilience," he added.
The new entities will be led by Cofer and CFO Sudhanshu Priyadarshi, respectively.
Keurig said that Global Coffee Co, with around $16 billion in combined annual net sales, will be well positioned to profit from the world's $400 billion coffee market, while Beverage Co, with more than $11 billion in yearly net sales, will focus on North America's $300 billion refreshment beverage market.
The newly-established coffee player would narrow the gap to the current market leader Nestle<NESN.S> in an ever-more demanding environment, ING analysts said in a note.
Coffee prices globally have been at their historical heights, as unpredictable weather patterns pressured supply, and volatilityincreased due to trade tensions.
Both Keurig and JDE Peet's have flagged the impact of high coffee bean prices, which are seen rising again after US President Donald Trump imposed a 50% tariff on beans imported from Brazil from August 6.
"Rolling the two coffee businesses together makes sense, reducing the European centric and commoditised nature of most of JDE Peet’s business, and giving Keurig international exposure," Jon Cox of Kepler Cheuvreux said.
Keurig has a market valuation of about $48 billion, while Amsterdam-listed JDE Peet's, with brands including Jacobs, L’Or, Tassimo and Douwe Egberts, was valued at €12.76 billion at Friday's market close, according to LSEG data.
Keurig's shares have risen nearly 10% this year on strong beverage sales, while the Dutch coffee maker's almost doubled, supported by stable revenues and focus shift towards shareholders' remuneration.
JDE Peet's is majority-owned by Germany’s JAB, which also holds a significant minority stake in Keurig Dr Pepper, according to LSEG data.
Reporting by Reuters
