Dr Pepper Snapple, Keurig Green Mountain announce merger agreement

Dr Pepper Snapple Group (DPS) and Keurig Green Mountain (MDLZ) announced that the companies have entered into a definitive merger agreement to create Keurig Dr Pepper (KDP), a new beverage company of scale with a portfolio of iconic consumer brands and unrivaled 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% of the combined company.

KDP will have pro forma combined 2017 annual revenues of approximately $11 billion. Dirk Van de Put, CEO of Mondelez International (MDLZ), which will have a significant stake in KDP, said, “We 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.”

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. The company will deliver strong cash flow generation and accelerate its deleveraging, with a target Net Debt/EBITDA of below 3.0x within two to three years after closing.

KDP anticipates total net debt at closing to be approximately $16.6 billion and it anticipates maintaining an investment grade rating.

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