An investor group led by JAB Holding Co. will acquire Keurig Green Mountain Inc. for $13.9 billion in cash, according to reports from Bloomberg.
Through the transaction, which is set at $92 per share, Kuerig, which is the leading maker of single-serve coffee brewers and K-cup pods, will be brought private, according to a statement made on December 7. The purchase price represents an amount that is 78% higher than the company’s closing stock price on December 4, and an 89% premium against the stock’s 20-day average. Additionally, it is the largest premium for any transaction in the beverage space above $5 billion, according to information gathered by Bloomberg.
Based in Luxembourg, JAB Holding manages the $16 billion fortune of the Reimann family of Austria. The firm is headed by three consumer-industry executives – Peter Harf, Bart Becht, and Oliver Goudet, according to the Wall Street Journal, who are planning to gain a position within the global market from which to challenge the coffee industry leader, Nestle SA. JAB already owns controlling stakes in Jacobs Douwe Egberts, Peet’s Coffee & Tea, Caribou Coffee, Einstein Noah Restaurant Group, Espresso House, and Baresso Coffee.
The Wall Street Journal reports that Keurig has seen a tough year, facing challenges involving consumer dissatisfaction over the release of its new line of hot brewers that are not compatible with its first-generation K-cups, and negative feedback surrounding the release of its first cold drink machine, which consumers are calling expensive, bulky and slow. In the year ending September 26 the company’s sales fell by 4% to $4.52 billion, and its profits fell by 16% to $498 million. However, after the buyout was announced, Keurig’s stock climbed 73% to $89.46 per share in New York, after falling 61% this past year.
Minority investors involved in the JAB group include Mondelez International Inc. and BDT Capital Partners. As part of the structure of the deal, Mondelez, which owns a 44% stake in Jacobs Douwe Egberts will trade a percentage of that stake for an equity stake in the Keurig deal.
Keurig has standing deals with Starbucks Corp and Dunkin Donuts among other companies who put their brands on Keurig’s K-cups, but JAB’s brands, including Peet’s and Caribou, are competitors with Starbucks and other chains, leading industry insiders to wonder if the JAB-led deal will threaten these partnerships in the future.
Keurig’s board has unanimously approved the deal, which is widely expected to close in the first quarter of next year.