- €15.7 billion takeover of JDE Peet’s
- Offer price represents 33% premium
- Coca-Cola about to offload Costa?
Keurig Dr Pepper’s (KDP:NASDAQ) shares fell 12% to $31.10 on Wall Street after the soft drinks giant announced (25 August) the acquisition of Dutch coffee maker JDE Peet’s (JDEP:AMS) for €15.7 billion (£13.6 billion) in cash.
The deal effectively unwinds 2018’s merger between Dr Pepper Snapple and Keurig Green Mountain which created Keurig Dr Pepper, whose diverse brand portfolio includes the purplish-red canned fizzy drink Dr Pepper.
Once the transaction completes in the first half of 2026, Keurig Dr Pepper plans to split into two separate US-listed companies called Beverage Co and Global Coffee Co, to be led by Keurig’s CEO Tim Cofer and CFO Sudhanshu Priyadarshi respectively.
While the deal will create a global coffee colossus able to better compete with market leader Nestle (NESN:SWX), investors don’t seem to like the risks associated with this ‘transformational transaction’ or the high price Keurig Dr Pepper is paying to get its hands on the Jacobs, L’Or and Douwe Egberts brands owner.
The €31.85 per share offer price represents a bumper 33% premium to JDE Peet’s 90-day volume-weighted average share price.
CREATING A COFFEE CHAMPION
Coming at a time of soaring global coffee prices driven by droughts in Brazil and Vietnam, not to mention tariff pressures, the transaction is expected to unlock around $400 million in annual cost savings and the new coffee entity will rival Nestle’s coffee business in size.
Cofer, an experienced consumer packaged goods executive with a track record of driving growth and leading transformations, commented: ‘Today’s announcement marks a transformational moment in the beverage industry, as we build on KDP’s disruptive legacy by creating two winning companies, including a new global coffee champion.’
He added: ‘By creating two sharply focused beverage companies with attractive and tailored growth propositions and capital allocation strategies, we are poised to generate significant shareholder value in both the near and long term.’
STRANGE BREW
Russ Mould, investment director at AJ Bell, believes something is ‘brewing in the coffee sector’, noting speculation that Coca-Cola (KO:NYSE) is looking to offload Costa Coffee.
‘What’s peculiar is the timing of such deals,’ said Mould. ‘Coffee prices doubled between January 2024 and March 2025 due to unfavourable weather conditions hurting supplies and costs going up for farmers and the supply chain. Big coffee brands had to put up prices and not every caffeine drinker was able to stomach the extra cost. That caused a headwind for the sector.’
He continued: ‘Coffee sellers - be it jars in the supermarket or lattes on the high street - have found life much harder over the past few years. As such, now seems an odd time for M&A in the sector. One would normally expect deals when a market is in good health, not when it is reeling from intense cost pressures.’
Mould added: ‘Costa has gone from piping hot to lukewarm in terms of its position in the coffee-on-the-go industry. It always seemed an odd brand to sit inside Coca-Cola’s portfolio and it has struggled to fight off competition. Coca-Cola is unlikely to make a profit on selling Costa in the current market, but that might not be disastrous for a company of its size. Costa might benefit from being owned by someone whose principal business is hot drinks, not cold fizzy ones, and getting a cut-price deal could present an opportunity for someone to get a bargain and reinvigorate the brand.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
