Dr Pepper Snapple Group and Keurig Green Mountain entered into a merger agreement to create a new beverage company, Keurig Dr Pepper (KDP).
Under the terms of the agreement, which was unanimously approved by the Dr Pepper Snapple Board of Directors, Dr Pepper Snapple shareholders will receive $103.75 per share in a special cash dividend and retain 13% of the combined company.
JAB Holding Company and its partners, will together make an equity investment of $9 billion as part of the financing of the transaction. JAB will be investing equity capital from JAB Holding Company as well as through JAB Consumer Fund. Entities affiliated with BDT Capital Partners, a Chicago-based merchant bank which provides long-term private capital and advice to closely held companies, are investing alongside JAB. Upon closing of the transaction, JAB will be the controlling shareholder. Mondelez International, JAB’s partner in Keurig, will hold an approximately 13%-14% stake in the combined company.
The balance of the transaction financing will be provided through financing debt commitments from JPMorgan Chase Bank, Bank of America Merrill Lynch and Goldman Sachs. The transaction is not subject to a financing condition and is expected to close in Q2/18, subject to the approval of Dr Pepper Snapple shareholders and the satisfaction of customary closing conditions, including receipt of regulatory approvals.
Goldman Sachs served as lead financial advisor to Keurig. BDT, AFW LP, J.P. Morgan Securities and Bank of America Merrill Lynch also acted as financial advisors to Keurig with Skadden, Arps, Slate, Meagher & Flom serving as legal counsel and McDermott Will & Emery serving as tax counsel. Credit Suisse served as financial advisor to Dr Pepper Snapple and Morgan, Lewis & Bockius is serving as Dr Pepper Snapple’s legal advisor. Clifford Chance U.S. is serving as legal advisor to Mondelez International.
KDP will have pro forma combined 2017 annual revenues of approximately $11 billion.
Larry Young, president and CEO of Dr Pepper Snapple, said, “This transaction will deliver significant and immediate value to our shareholders, along with the opportunity to participate in the long-term upside potential of our combined company and attract new brands and beverage categories to our platform in a fast-changing industry landscape.”
Bart Becht, partner and chairman of JAB Holding Company and Chairman of Keurig, said, “We are very excited about the prospect of KDP becoming a challenger in the beverage industry. Management’s proven operational and integration track record along with their commitment to innovation and potential future brand consolidation opportunities, while maintaining an investment grade rating, positions the company well for long-term success and material shareholder value creation.”
