Dr Pepper merges with JAB-backed Keurig

Keurig Green Mountain Inc. agreed to combine with Dr Pepper Snapple Group Inc. (NYSE: DPS) in a deal that will pay $18.7 billion in cash to shareholders of the soft-drink company and give them a stake in the coffee and soda giant controlled by the billionaire Reimann family’s JAB Holding Co.

Snapple shareholders will get $103.75 a share in a special cash dividend and retain 13 percent of the combined entity, the companies said. The dividend is about 9.2 percent above where Snapple shares closed on Friday, Jan. 26.

JAB, the Vienna-based Reimann family’s investment vehicle, has been expanding its food and drink businesses as it sheds fashion holdings such as Jimmy Choo Plc. Keurig Dr Pepper, as the new company will be known, will have pro forma 2017 revenue of about $11 billion and bring together iconic U.S. brands including Dr Pepper, 7UP, Snapple, A&W, Mott’s and Sunkist with leading coffee brand Green Mountain Coffee Roasters.

The deal vaults JAB into competition with the likes of Coca-Cola Co. (NYSE: KO) and PepsiCo Inc. (Nasdaq: PEP) in soft drinks, moving it beyond fast food and coffee, where the privately held company has acquired Panera Bread, Caribou, Peet’s and other chains.

JAB’s acquisition spree has been led by consumer-goods industry veterans Peter Harf, Bart Becht and Olivier Goudet, on behalf of the Reimann family.

The deal “unlocks the opportunity to combine hot and cold beverages and create a platform to increase exposure to high-growth formats,” said Bob Gamgort, chief executive officer of Keurig.

Goldman Sachs & Co. (NYSEL GS) served as lead financial adviser to Keurig. BDT & Co., AFW LP, J.P. Morgan Securities LLC (NYSE: JPM) and Bank of America Merrill Lynch also advised Keurig, and Skadden, Arps, Slate, Meagher & Flom LLP was legal counsel. Credit Suisse Group AG was financial adviser to Dr Pepper Snapple, and Morgan, Lewis & Bockius LLP provided legal advice.