Keurig Dr Pepper Secures Additional $7 Billion In Financing To Facilitate Acquisition Of JDE Peet's – CoffeeTalk

Keurig Dr Pepper Inc. is securing $7 billion in financing from Apollo Global Management and KKR, aimed at facilitating its acquisition of the Dutch coffee company JDE Peet’s NV, which is valued at approximately $18 billion. This maneuver is in response to investor apprehensions regarding the company’s rising debt levels due to the acquisition. Notably, concerns were expressed by TD Cowen analyst Robert Moskow, who indicated that the acquisition increases the company’s leverage and significantly expands its engagement in the coffee sector, a category that investors preferred to see minimized.

Following the acquisition announcement in August, Keurig Dr Pepper’s stock saw a rebound, surging 7.6% on Monday, although the shares had declined by 15% year-to-date as of October 24. The financial backing consists of a $4 billion investment from Apollo and KKR into a coffee pod manufacturing joint venture, wherein Keurig Dr Pepper will maintain control. Additionally, a $3 billion investment will be made in convertible preferred stock in the beverage unit.

Barclays analyst Lauren Lieberman noted that these investments are expected to keep the combined company’s leverage from hindering operational flexibility or affecting equity valuation significantly. Keurig Dr Pepper has announced plans to separate its beverage and coffee divisions by the end of 2026. The company projected that the integration with JDE Peet’s would yield savings of approximately $400 million over the next three years.

On the financial front, for its third quarter, the company reported sales figures reaching $4.3 billion, exceeding analyst expectations of $4.1 billion. The company has now revised its outlook for fiscal 2025, forecasting constant currency net sales growth in the high-single-digit percentage range, a notable increase from earlier predictions which estimated growth in the mid-single digits.

CEO Timothy Cofer expressed satisfaction with the third quarter results, highlighting strong growth in the US Refreshment Beverages segment and a positive turnaround in US Coffee, where sales, after a decline over ten consecutive quarters, increased by 1.5%. The total sales of US beverages surged by 14%, driven by higher prices and increased volume of products sold, including notable performance from the energy drink Ghost, recently acquired by Keurig Dr Pepper. The company also aims to maintain an adjusted earnings per share growth rate for the current year within the high-single-digit percentage range.

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