Consumer group JAB Holding has agreed to acquire Dr Pepper Snapple for almost $19bn (£13.5bn) to merge the soft drinks giant with its own Keurig Green Mountain coffee business.
The deal – the largest ever acquisition in the soft drinks market – will create a US beverage group with annual revenues of about $11bn (£7.8bn).
Luxembourg-based investment vehicle JAB said the transaction would lead to a challenger in the beverage industry with a “world-class” portfolio of brands and an “unrivalled” nationwide distribution capability.
The combination joins together Dr Pepper, 7-Up, Snapple, Sunkist and Canada Dry with coffee brand Green Mountain Coffee Roasters and the Keurig single-serve coffee system, as well as more than 75 owned, licensed and partner brands in the Keurig estate.
“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,” said Dr Pepper Snapple CEO Larry Young.
“We are excited to combine with Keurig to build on the rich heritage and expertise of both companies and provide the highest-quality hot and cold beverages to satisfy every consumer throughout the day.”
Shares in the US group soared more than 20% to $127 each in New York following the deal announcement.
JAB will pay a special cash dividend of $103.75 per share to Dr Pepper Snapple shareholders under the terms of the deal and add its Keurig Green Mountain business into the company, which will remain publicly traded and be renamed Keurig Dr Pepper.
Dr Pepper Snapple’s shareholders will also bag a 13% stake in the combined group.
Bart Becht, JAB and Keurig chairman, added: “We are very excited about the prospect of Keurig Dr Pepper 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.”
Mondelez International, which partnered with JAB on its December 2015 takeover of Keurig in the creation of Jacobs Douwe Egberts, will own about 14% of the new combined group.
Mondelez CEO Dirk Van de Put said: “We have been very pleased with our coffee partnership with Keurig, and strongly support the strategic rationale for this transaction. We look forward to continuing to participate in the compelling value-creation and long-term growth opportunities inherent in this powerful beverage platform.”
Keurig Dr Pepper has forecast $600m in annual synergies by 2021, with net debt expected to be about $16.6bn at the close of the deal.
Bob Gamgort, current CEO of Keurig, will run the combined company.