Dr Pepper Snapple, Keurig Green Mountain to merge

Newly formed Keurig Dr Pepper hopes to create challenger in the beverage industry.

Dr Pepper Snapple Group, Inc. and Keurig Green Mountain, Inc. have entered into a definitive merger agreement to create Keurig Dr Pepper.

The new beverage company will have the distribution capability to reach virtually every point-of-sale in North America.

Under the terms of the agreement, which has been 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 percent of the combined company. And KDP will have pro forma combined 2017 annual revenues of approximately $11 billion.

This combination of two iconic beverage companies joins together the brands Dr Pepper, 7UP, Snapple, A&W, Mott’s and Sunkist with the 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 system.

“Our view of the industry through the lens of consumer needs, versus traditional manufacturer-defined segments, unlocks the opportunity to combine hot and cold beverages and create a platform to increase exposure to high-growth formats,” says Bob Gamgort, CEO of Keurig

Dirk Van de Put, CEO of Mondelēz International, which will have a significant stake in KDP, says they, “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.”

Bob Gamgort, current CEO of Keurig, will serve as chief executive officer of the combined company and Ozan Dokmecioglu, current chief financial officer of Keurig, will serve as its chief financial officer.

Dr Pepper Snapple President and CEO Larry Young intends to transition to a role on KDP’s Board of Directors to help the new management team realize the full potential of the company.

Bart Becht, of JAB, will serve as Chairman of the company’s Board of Directors and Bob Gamgort will become an Executive Member of the Board. Four additional directors will be appointed by JAB, two directors will be appointed by Dr Pepper Snapple, including Mr. Young, two directors will be appointed by Mondelēz International, and two independent directors will be appointed.

Keurig and Dr Pepper Snapple will continue to operate out of their current locations and Bob Gamgort, CEO of the combined company, will be based in Burlington, Mass. The combined company will draw on the leadership teams of both companies, who will continue running their running their respective businesses.

KDP targets realizing $600 million in synergies on an annualized basis by 2021. Dr Pepper Snapple expects to pay its first quarter ordinary course dividend of $0.58 per share. At the close of the transaction, the company expects to deliver an annual dividend of $0.60 per share.

Since becoming a private company following its acquisition by a JAB-led investor group in March 2016, Keurig has renewed its marketing investment and improved its new brewer innovation pipeline, which has resulted in renewed top-line volume growth, increasing U.S. household penetration for Keurig brewers to 20 percent, from 17 percent, in the last two years.

In the same period, Keurig has added key brand partners into the Keurig system with the help of strategic pod price reductions and value-added services. The combination of those two factors has allowed the company to improve its pod growth from the low-single digits to mid-single digits in the second half of calendar year 2017.

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Crystal Lindell has more than 10 years of journalism experience, and worked primarily at daily newspapers before joining BNP Media 2010. Before joining Food Engineering as the Managing Editor, she was the managing editor of a sister publication, Candy Industry Magazine, where she learned first-hand the joys of eating chocolate for breakfast. Lindell holds a master’s degree in public affairs reporting from the University of Illinois – Springfield and a bachelor’s degree in political science from Western Illinois University.