Posted: May 28th, 2021
These two companies merged creating Keurig Dr. Pepper which was an $18.7 billion deal (Arthur, 2018). The company of these two highly caffeinated drinks makes over $11 billion dollars in annual revenue. Dr. Pepper Snapple shareholders will receive $103.75 per share in a cash dividend and retain 13% of the combined company (Arthur, 2018). Keurig shareholders will hold the remaining 87%, which means that private equity firm, JAB Holdings will be the controlling shareholder. JAB made an equity investment of $9 billion to help finance this deal.
The merger gives Dr. Pepper the opportunity to participate in the upside potential of the combined company and attract ne brands and beverages to the company (Arthur, 2018). This merger was done to create a new scale beverage company combining the sale of hot and cold beverages all over the world. Keurig and Dr. Pepper now target bringing in $600 million in synergies on an annual basis and KDP will deliver and annual dividend of 60 cents per share (Arthur, 2018). After the merger was announced, shares of Dr. Pepper Snapple skyrocketed and at one point, the stock was up more than 42% (Arthur, 2018). This is now the seventh largest company in the US food and beverage sector and the third largest beverage company in North America.
This merger was done to bring together coffee and soda brands such as Dr. Pepper, 7up, Snapple, and Green Mountain Coffee, along with Keurig’s single serve coffee system (Arthur, 2018). Keurig Dr. Pepper maintains dual headquarters in Burlington, Massachusetts, and Plano, Texas. Keurig was acquired by the private equity firm JAB Holdings in 2016, which also accounts for Krispy Kreme Doughnuts, Caribou Coffee, Peet’s Coffee & Tea, and Jacobs Douwe Egberts. Shares in KDP began trading on the New York Stock Exchange on July 10, 2018 under the ticker symbol- “KDP” (Arthur, 2018).
Arthur, Rachel. A New Challenger in the Beverage Industry: Keurig Dr. Pepper Announces Merger Completion. July 10, 2018. Retrieved from: Error! Hyperlink reference not valid..
Businesses will always compete to stay at the top, to improve their growth ability and to succeed. For this to happen, different things must be done, one of them is merging with another company to form one new company. Companies pursue mergers for several market factors. One of the reasons why a company should decide to merge with another is to increase the wealth of the shareholders (Pettit & Ferris, 2013). When two companies unite, they form a great force that increases the value of the newly created company. Through merging power, companies can increase the ability to generate revenue, for example, market expansion.
Companies may also decide to merge to reduce costs of coming business activities that they may incur, especially due to incoming new technologies. To be able to achieve long term goals that many businesses have, joining forces is essential since it helps one invest to acquire profits (Moreno-Garcia et al.,2015). Personal interests, too, can lead to merging. A merger can also be motivated by the wish of a company to acquire certain assets that take a long time to be achieved, like new technologies. Lacking adequate money to settle debts or develop their businesses may lead companies to merge to get financial support.
A merger is very important since it helps expand a company’s reach, improve profits, or gain market share. In a nutshell, all this is done to benefit the shareholders and improve the company. For a business to expand or increase its range of products, there is a high need for merging. Most companies that merge benefit by lowering the total tax liability. By doing all this, a great change will be noted in our businesses.
Moreno-García, E., Vargas-Hernández, J. G., García-Santillán, A., Santiago-Jiménez, L. M., & Hernández-Herrera, V. G. (2015). The Merging Process between Firms and its Influence in the Economic Value Added: A Comparative Descriptive Analysis.
Petitt, B. S., & Ferris, K. R. (2013). Valuation for Mergers and Acquisitions: Valuation_2. FT Press.
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