The company that owns coffee maker Keurig, Dr Pepper, and a host of America’s favorite drinks is splitting in two, with help from private capital titans. The deal draws a line under a period of uncertainty for Nasdaq-listed Keurig Dr Pepper, after an acquisition announcement over the summer tanked its share price and drew the attention of activist investor Starboard Value.
KKR and Apollo Global Management are set to co-lead a $7 billion debt investment in KDP to help finance its pending $18 billion acquisition of JDE Peet’s, a Dutch coffee and tea maker, which was first announced in August. KDP will eventually split its beverage and coffee businesses into two publicly traded companies, effectively unwinding the 2018 merger between coffee company Keurig and beverage producer Dr Pepper.
The coffee portion of KDP has been a drag on the company’s overall performance over the past few years due to shrinking sales, as the cost of coffee beans increased and purchases of its K-Cup pod declined. Net sales for the company’s US coffee business declined 5.4% and 2.6%, in 2023 and 2024, respectively.
During the same period, sales of KDP’s US refreshment beverages business, including brands such as Dr Pepper, Polar, Evian and Vita C, grew by 9.1% and 10.3%.
The Aug. 25 announcement of KDP’s tender offer for JDE Peet shook the confidence of investors, who were concerned about the company increasing its exposure to the coffee market and the debt being proposed for use in the transaction.
KDP said it would fund the transaction with a combination of senior unsecured and junior subordinated debt and cash, which would bring its projected net debt to $38 billion. On the day the deal was announced, shares of KDP were down 11% at market close. By October, Starboard Value had built a stake in the company.
Apollo and KKR will act as a “white knight” in the deal announced Monday, with the joint capital injection alleviating activist investor concerns by bringing KDP’s leverage down to $31 billion.
Related read: PE indulges in food and beverage deals, setting a quarterly high
KDP’s stock jumped more than 7.6% Monday, as of market close.
A $4 billion chunk of the capital infusion will go toward newly formed K-Cup and another single-serving joint venture, called Beverage Co. Goldman Sachs is also participating.
The remaining $3 billion will be allocated toward convertible preferred stock investments in both KDP and, eventually, the Beverage Co.
PE has invested in $29.3 billion into food and beverage deals so far this year, according to PitchBook data, including Affinity Equity Partners’ buyout of frozen seafood company Golden Fresh.
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