Keurig Dr Pepper’s shares hit their lowest point in more than five years in the wake of its “poorly received” deal to acquire Dutch coffee giant JDE Peet’s.
BNP Paribas analyst Kevin Grundy downgraded KDP in late September to ‘underperform’, its first sell-equivalent rating in nearly a year. The market reaction pushed down KDP shares to $25.50, a 27.6% drop from their high of $35.20 in August.
Grundy cited concerns over the company’s plan to combine Keurig with JDE Peet’s – owner of Douwe Egberts, Kenco and the Peet’s Coffee café chain – while spinning off Dr Pepper to focus entirely on soft drinks. The $15.7bn (£11.7bn) deal is expected to close in the first half of 2026.
Following the late August announcement, stock fell by 17.7% in just two days. Share prices tumbled further in the following weeks as investors grew wary of “elevated noise and uncertainty”, according to Barclays analyst Lauren Lieberman.
Downgrading KDP from ‘overweight’ to ‘equal weight’, she pointed out the deal’s “controversial mechanics” – though said her team was “inclined to think this reshuffling of assets will prove to be the right move”.
The binding all-cash offer, which is not subject to a KDP shareholder vote, carries a 33% premium over JDE Peet’s 90-day share price average, and increases leverage on KDP’s balance sheet.
Barclays’ Lieberman said the restructure left “an exceedingly bad taste in the investment community’s mouth”.
“In our view, splitting up [soft drinks] and coffee first, and then merging the standalone coffee co with JDEP would have been more palatable.
“That said, the stock’s performance since the news has also made it quite plain that investors were not looking for transformational M&A in the first place.”
The hostile reaction came despite the deal being championed as a “transformational moment” by KDP CEO Tim Cofer. According to KDP, the merger will save both companies about $400m a year.
While investors wait for further clarity – expected at KDP’s 27 October investor update – many analysts have slashed target prices.
Lieberman was the latest to cut expectations, slashing Barclays’ target from $39 to $26, following Grundy’s $24 target earlier this week.
They follow several others, including from Piper Sandler, which cut its target price to $35 on 17 September, Citigroup which cut from $41 to $37 in late August alongside HSBC, which cut from $42 to $30 in late August.
Debt is not the only worry on investors’ minds, however, as high coffee prices and weaker demand for consumer staples weigh on the potential for earnings.
Grundy said: “From here, demand elasticity on sharply higher coffee costs poses risk, and ‘usual’ pre-close overhangs (e.g., synergy capture, dis-synergies) keep us cautious.
“We see risk to current expectations, deal risk, and credibility setback all likely to weigh on KDP’s [earnings] multiple.”
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