At $92 a share, the deal represents a whopping 78% premium over the price of Keurig’s shares as of closing Friday – prompting its shares to jump 74% to $89.95 shortly before the market opened Monday.
Prior to the deal, Keurig’s stock had tumbled about 61% in the past year after the roll-out of its next generation hot brewer blocked the use of unlicensed pods and those that worked in the first generation machine. The company also got flack for temporarily eliminating the wildly popular reusable My K-Cup, which allowed consumers to use any coffee in the machine. The firm brought the product back in response to consumer demand.
The company’s latest invention – the Keurig KOLD machine also has had a softer than expected launch as critics complain the machine is too slow and expensive compared to the ease of buying ready-to-drink sodas.
Despite these downsides, JAB was drawn to Keurig as a way to develop a global coffee platform. JAB also has controlling stakes in Peet’s Coffee and Tea, Caribou Coffee Company and several fast causal chains that serve coffee, including shops in the US, Scandinavia and Denmark.
JAB is acquiring Keurig Green Mountain in partnership with strategic minority investors who are already shareholders in Jacobs Douwe Egberts, including Mondelēz International and entities affiliated with BDT Capital Partners. Mondelez was attracted to the deal because it provides immediate access to the US coffee market, which is the largest coffee segment globally, according to a press release.
“By leveraging an existing investment … and not contributing incremental capital, we have the opportunity to diversify our participation in the global coffee category, while continuing to invest in our core snacking business to deliver significant value for our shareholders over the long term,” Mondelez CEO Irene Rosenfield said in a release.
As part of the deal, Keurig Green Mountain will continue to operate independently under the current management and with its existing employees. It also will remain headquartered in Waterbury, Vt., the release notes.
Keurig CEO Brian Kelley assured stakeholders of the now privately held company that the coffee company will continue to develop “innovative beverage solutions for consumers at the touch of a button.”
The Coca-Cola Company, which owns about 25.9 million Keurig shares, supports the deal and says it is looking forward to working with JAB.
Coke’s shares climbed 10 cents to $43.39 after the deal was announced when the market opened Monday, according to media reports.
The buyout also triggered a ripple effect that caused competitor SodaStream’s stocks to climb 9.8%, according to Seeking Alpha News Editor Clark Schultz, who also noted Coffee Holding climbed 11.9%, Farmer Brothers rose 0.9% and TreeHouse Foods increased 0.8% Monday morning.