Keurig Green Mountain announced plans Monday to buy Dr Pepper Snapple, in a deal that creates a new beverage giant with $11 billion in sales and combines the Dr Pepper, 7UP and Keurig's single-serve coffee brands.

The deal is the latest backed by German investment firm JAB Holding Company, which has been steadily compiling a lunch and breakfast empire. JAB, which acquired Keurig Green Mountain in 2016, also owns Panera, Caribou Coffee and other breakfast and coffee concepts.

The deal forges a path for JAB to be an acquirer and major distributor of drinks in the U.S.

In a change of course from its previous acquisitions, JAB is keeping Dr Pepper partially a public company. The new entity will be 87 percent owned by Keurig shareholders and 13 percent owned by Dr Pepper shareholders. With a public float, Keurig has easier access to cash for more acquisitions down the road.

"The public component gives us a broader toolkit that we could use for a consolidation going forward, allows us to think of some creative structures in that space and it also over time provides some liquidity if some of our private partners need to exercise some liquidity in an organized fashion," the company told investors, according to a transcript from FactSet.

The deal also gives Keurig access to Dr Pepper's drink distribution network, one of the country's major three. It therefore creates an option down the road for Keurig to shuffle its coffee and other products through its pipeline.

Keurig will also gain access to Dr Pepper's allied brands, a portfolio of healthy and upstart drinks it has invested in and distributes through its network. These brands include Fiji Water and Vita Coco. Bai was an allied brand until Dr Pepper acquired it for $1.7 billion last year.

"I think that's a very good model for both of us together in the long term," the company said of the allied brand strategy.

News of the deal sent Dr Pepper Snapple shares up 25 percent to $119.58 in morning trading.

Keurig CEO Bob Gamgort will lead the new company, called Keurig Dr Pepper. Larry Young, CEO at Dr Pepper Snapple, will become a director. Dr Pepper shareholders will also receive a cash dividend of $103.75 per share.

Keurig and Dr Pepper Snapple will continue to run out of their current locations, Waterbury, Vermont and Plano, Texas respectively.

The deal is expected to close in the second quarter, with the company estimating total debt to be about $16.6 billion at that time.

The company is still vastly outsized by PepsiCo and Coca-Cola, which had sales in 2016 of $63 billion and $41 billion, respectively.

The acquisition must still be approved by shareholders of Dr Pepper Snapple.

—AP contributed to this report.

Correction: A previous version of this article incorrectly referred to JAB as an Austrian investment firm. JAB is a German firm headquartered in Luxembourg.