Monster Beverage Stays at the Top of the Beverage Giants
Sale of Keurig Green Mountain
On December 7, 2015, Keurig Green Mountain (GMCR) announced that it will be acquired by an investor group led by JAB Holding Company for $13.9 billion. The acquisition price reflects a premium of 77.9% over Keurig’s stock price on December 4.
The JAB-led investor group includes minority investors who are existing shareholders in Jacobs Douwe Egberts B.V., including Mondelēz International (MDLZ) and entities affiliated with BDT Capital Partners. The acquisition is expected to close in the first quarter of 2016.
The deal was welcomed by Keurig investors who sent the stock soaring 72% to $88.90 on December 7. Keurig has disappointed its investors with its dismal performance in fiscal 2015, which ended September 25, 2015. The company’s sales fell by 4% to $4.5 billion.
Keurig makes up 0.6% of the Consumer Staples Select Sector SPDR ETF (XLP), which rose by 0.3% on December 7. Keurig also makes up 0.1% of the holdings of the iShares Russell 3000 ETF (IWV).
Impact of Keurig deal on Coca-Cola
Coca-Cola (KO) has a ~17% stake in Keurig Green Mountain, which it purchased as part of a strategic partnership between the two companies. According to the deal, Coca-Cola’s brands would be made available on the Keurig Kold home carbonation machine.
The news of the acquisition of Keurig Green Mountain was welcomed by Muhtar Kent, chairman and CEO (chief executive officer) of Coca-Cola. Keurig’s shares rose significantly after news of the acquisition. Coca-Cola is likely to make a profit on the sale of its stake.
Coca-Cola CEO stated that the company will continue its partnership with JAB to capture the growth prospects in the single-serve, pod-based segment of the cold beverage industry. Aside from Coca-Cola, some brands of Dr Pepper Snapple (DPS) are also available on the Keurig Kold beverage system.
Cott to acquire Aquaterra
Another key update in the nonalcoholic beverage industry was the December 8, 2015, announcement of an agreement by Cott (COT) to acquire Aquaterra, a Canada-based direct-to-consumer home and office water delivery and coffee service business. Cott is expected to purchase Aquaterra for ~$47 million, or 0.8 times the revenue for the 12 months ended June 30, 2015.
The acquisition, which is expected to close in January 2016, will help Cott grow beyond soda beverages and expand its presence in the high-margin home and office water delivery and coffee service categories.
On November 15, Cott announced the completion of the acquisition of Big Rock Springs by its DS Services Business Unit. Big Rock Springs is a home and office bottled water delivery business.