Keurig Green Mountain (GMCR – Get Report), the maker of beverage dispensers for the mass market, has agreed to be acquired by a JAB Holding-led investor group for about $13.9 billion, the two companies announced Monday morning. It bought Caribou Coffee Co and Peet’s Coffee & Tea in 2012 and formed a joint venture between coffeemakers DE Master Blenders and Mondelez International in July. Keurig’s shares were trading at $90.56 before the opening bell on Monday.
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Keurig shares had, as of Friday, fallen by some 61% this year, as the group struggled with strengthening competition in the United States coffee capsules market, and with a somewhat tepid response to the launch of its Keurig 2.0 coffee brewer. JAB’s purchasing price equates to $92 a share, a 78% premium on Keurig’s closing price on Friday.
Coca-Cola, Keurig’s biggest single shareholder with a 17.4 percent stake, is backing the deal.
The investment firm, which also owns other assets including luxury brands Bally and Jimmy Choo PLC and beauty-products maker Coty Inc., is betting that adding Keurig’s technology and its reach in the U.S.to its current holdings can make it a stronger rival to competitors including Nestle SA, the world’s largest packaged-coffee company. This transaction is expected to close in the first calendar quarter of 2016.
Keurig Green Mountain president and CEO Brian Kelley said: “This transaction will deliver significant cash value for our shareholders and offers an exciting new chapter for our customers, partners and employees by combining Keurig Green Mountain with JAB’s global coffee platform”.
Keurig, which started as Green Mountain Coffee Roasters in 1981, also has been a regular recipient of Vermont’s incentives for job creation since 2007.
The deal compensates the investors after the weak results and dimming prospects weighed on the stock this year. Sales of K-cups, which accounted for more than 80% of Keurig revenue, rose 1% to $3.6 billion in the year ending September 26.
Image: Keurig KOLD machine brews carbonated drinks.
The deal comes as sales of the coffee pods and brewers that Keurig popularized are slumping.
JAB and its co-investors, Oreo cookie producer Mondelez International and banking honcho Byron Trott’s BDT Capital Partners, will be hoping to change that in time, in private and in conjunction with its other coffee investments. But rather than stick the funds in stocks, bonds or real estate, as many family-money managers do, these men buy consumer-goods and fashion companies, most of which are far better known than the investors themselves.
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The soda maker is mainly interested in Keurig’s cold beverage business, he said.
