Keurig Dr Pepper Buys Coffee Company JDE Peet For $18 Billion

Keurig Dr Pepper (KDP) is buying Dutch coffee and tea company JDE Peet (JDEP) for $18 billion U.S.

The deal is aimed at boosting Keurig Dr Peper’s fledgling coffee business, the company said in a news release announcing the purchase.

Keurig Dr Pepper will pay JDE Peet’s shareholders 31.85 euros ($37.30 U.S.) per share in cash, representing a 33% premium to the Dutch company’s recent stock price.

The total equity purchase price of the deal is $18.40 billion U.S. Once finalized, the takeover is expected to generate $400 million U.S. in cost synergies over three years.

Keurig Dr Pepper, which owns popular consumer brands such as Dr Pepper, 7Up, Snapple and Green Mountain Coffee, has seen shrinking sales at its U.S. coffee division in recent years.

In this year’s second quarter, the company’s coffee sales declined 0.2% to $900 million U.S. due to a fall in sales of its single-serve coffee pods and Keurig coffee machines.

Keurig Dr Pepper has been looking to raise its appeal with consumers who prefer to drink coffee at home, while also venturing into cold coffee beverages.

Following the JDE Peet acquisition, Keurig Dr Pepper intends to split up its beverage and coffee units into two separate companies.

The separation will effectively undo the 2018 merger between Keurig and Dr Pepper Snapple, which at the time created the third-largest beverage company in North America with $11 billion U.S. in annual sales.

After the split, the standalone coffee company is anticipated to turn $16 billion U.S. in annual sales, while the beverage firm is expected to have $11 billion U.S. in annual revenue.

Prior to the acquisition being announced on Aug. 25, KDP stock had risen 11% this year to trade at $35.14 U.S. per share.