Mondelez International, a minority investor in the Jacobs Douwe Egberts B.V. coffee business controlled by JAB, will hold onto a stake in the new Keurig Green Mountain holding company but will not invest any new cash.
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The deal values Keurig at $13.9 billion, or $92 a share, representing a 78% premium to the company’s closing price on Friday.
Billionaire investor David Einhorn of hedge fund Greenlight Capital, who bet against Keurig Green Mountain Inc shares, suffered a blow on Monday when the coffee maker agreed to sell itself to JAB Holding Co, sending its stock up 74 percent.
JAB’s other partners in the buyout include U.S. snacks giant Mondelez International and affiliates of BDT Capital Partners.
After the deal closes, which is expected to happen in the first quarter of next year, Keurig Green Mountain Inc. said it will remain headquartered in Waterbury, Vermont.
Keurig Green Mountain, the “K” in K-Cups and manufacturer of single-serve coffee packs and coffee makers, was sold to an equity firm for $13.9 billion.
Year-end earnings were equally disappointing, with net sales of $4.52 billion in fiscal year 2015, down 4 percent from 2014 sales of $4.7 billion. It launched a $300 machine called Keurig Kold that makes single-glasses of the soda Coca-Cola as well as other soft drinks.
The deal suggests that the paths of Keurig and Jacobs Douwe Egberts are bound to intersect as JAB Holding seeks to reverse Keurig’s fortunes. Its stock had lost half its value up through Friday. What it lacked, and has now in Keurig, is a strong position in the single-serve coffee market, the industry’s fastest-growing segment. Astrachan believes JAB, by taking Keurig Green Mountain private, will accelerate the company’s growth, particularly in global markets. (NYSE: KO) has a sizable stake in Keurig, approximately 16% as of last February. Keurig is the leader in North America with a 61 percent market share. That investment was $1 billion in the red as of August when Keurig shares tumbled to two-year lows.
The deal comes as Keurig has reported slowing sales of its machines and K-cups, the coffee-filled pods that are used in Keurig’s machines.
“The Coca-Cola Company is fully supportive of this transaction”, said Muhtar Kent, Chairman and CEO, The Coca-Cola Company.
At the close of the transaction, Keurig Green Mountain will be privately owned and will continue to be operated independently by the company’s management team and employees.
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And Mark Astrachan, an analyst at Stifel, said Keurig’s joining JAB could pose a risk to contacts Keurig has with major brands like Starbucks to make K-Cup pods under their brands, since those companies compete with some owned by JAB.
