Dr Pepper Snapple to merge with Keurig to create drinks giant

Dr Pepper Snapple and Keurig Green Mountain have agreed to merge to form a beverage company with annual revenue of around $11bn.

Under the terms of the deal, Dr Pepper shareholders will receive $103.75 per share in a special cash dividend and retain 13% of the combined company. Global investment firm JAB Holding - which owns coffee group Keurig - and its partners will make a $9bn equity investment as a part of the transaction financing and will be the controlling shareholder once the transaction closes.

Mondelez International, JAB’s partner in Keurig, will hold a stake of around 13-14% in the combined company.

Larry Young, president and chief executive officer of Dr Pepper Snapple, said: "This transaction will deliver significant and immediate value to our shareholders, along with the opportunity to participate in the long-term upside potential of our combined company and attract new brands and beverage categories to our platform in a fast-changing industry landscape. We are excited to combine with Keurig to build on the rich heritage and expertise of both companies and provide the highest-quality hot and cold beverages to satisfy every consumer throughout the day."

Keurig CEO Bob Gamgort said: "The combination of Dr Pepper Snapple and Keurig will create a new scale beverage company which addresses today’s consumer needs, with a powerful platform of consumer brands and an unparalleled distribution capability to reach virtually every consumer, everywhere. We are fortunate to have talented leadership teams within both companies, and I look forward to working together with the Dr Pepper Snapple team to make this combination a success for all of our stakeholders.”

The deal is due to close in the second quarter.

At 1330 GMT, Dr Pepper Snapple shares were up 39% in pre-market trade to $133.