JAB Holding to Buy Out Keurig in Biggest Coffee Deal Ever
Overview of the proposed Keurig-JAB transaction
On December 7, 2015, Keurig Green Mountain (GMCR) entered into a definitive agreement under which JAB Holding Company will acquire Keurig Green Mountain for a total equity value of $13.9 billion. The agreement includes a termination fee of $475 million. The deal will be the biggest acquisition ever in the packaged coffee sector, according to Dealogic.[1]
Basics of the deal
In the all-cash transaction, Keurig Green Mountain’s shareholders will receive $92 per share. The purchase price represents a premium of approximately 77.9% over Keurig Green Mountain’s closing price of $51.70 on December 4, 2015.
JAB is acquiring Keurig Green Mountain in partnership with Mondelez International (MDLZ) and BDT Capital Partners. Mondelez and BDP Capital have invested in Jacobs Douwe Egberts, the JV (joint venture) that combined the coffee businesses of Mondelez and DE Master Blenders 1753.
The deal is expected to complete by the first quarter of 2016, subject to stockholder and regulatory approvals and other customary closing conditions. Keurig Green Mountain will operate independently as a private entity once the deal is complete.
Coca-Cola (KO), Keurig’s largest shareholder with almost a 17.4% stake, has approved the deal. KO will be divesting its entire stake as a result of the buyout.
Market reaction
This year, Keurig’s stock price fell by 60.8% to reach $51.70 on December 4, 2015. Keurig stock has fallen sharply over the year due to its declining sales and a lukewarm reception to new product launches. The stock price rose by 71.9% to reach $88.89 after the deal was announced on December 7, 2015.
Keurig makes up 0.6% and 0.25% of the portfolio holdings of the SPDR Consumer Staples ETF (XLP) and the PowerShares ETF (QQQ), respectively. Packaged food products companies make up almost 18.5% of XLP’s portfolio and consumer firms make up almost 28% of the holdings of QQQ.
[1] The Wall Street Journal
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