MBA 6081
Unit VIII Essay – Merger/Acquisition Evaluation
Columbia Southern University
MBA 6081 - Corporate Finance
Merger of Keurig Green Mountain and Dr Pepper Snapple Group
In July 2018, Keurig Dr Pepper announced the successful completion of the merger
between Keurig Green Mountain and Dr Pepper Snapple Group creating KDP, the seventh-
largest company in the U.S. food and beverage sector and third-largest beverage company in
North America. Keurig also markets the #1 single serve coffee brewing system in the U.S. and
Canada [ CITATION BEV18 \l 1033 ]. This case study will describe how the acquisition
affected financial statements, balance sheets, income statements, and cash flows. It will evaluate
KDPs financial policies after the merger including capital structures, debt, leverage, dividend
policies, and risk management. Lastly, this case study will conclude with the findings,
recommendations and rationale as to whether the acquisition was beneficial to both parties.
Background and Reason for Merger
Babe Ruth has been called the “greatest player of all time” by many sportscasters. His .
690 batting average was backed up by being the first player to hit 30, 40, 50 and then 60 homers
in a season [ CITATION Kur21 \l 1033 ]. Prior to his success, he was also known as the “King
of Strikeouts” and led the American League in strikeouts five times, accumulating 1,330 in his
career [ CITATION Kau20 \l 1033 ]. Keurig, has a similar strike-out story to tell. In June of
2016, they canceled their at-home soda machine called “The Keurig Kold”; it was the overpriced
machine nobody wanted. The device was designed to go after the home soda market occupied by
, SodaStream. Unfortunately, the Keurig version was substantially more expensive and could not
make sparkling water [CITATION Pla16 \l 1033 ].
Keurig Green Mountain knew their long-term success needed to include the carbonated
soft drink (CSD) market; the home soda machine was just a temporary setback. Much like Babe,
they had to refine their game and try again. Six months after the merger, the KDP portfolio had
strong market share growth as documented by reporting net sales growth of 3.2% in the 2019
annual report. [CITATION Keu21 \l 1033 ]
Risks during the KDP Merger and Mitigating Measures
One risk of completing a merger can be striking a balance between two distinct cultures
and service standards. [ CITATION All13 \l 1033 ] The leadership at JAB, Keurig Green
Mountain and Dr Pepper Snapple all had similar goals for their brands and knew what each
brought to the table. The Dr Pepper CEO, Larry Young, spent time with all organizations in the
merger and paid special attention to his employees. His active communication ensured that not a
single job was lost in the transition.[ CITATION Keu21 \l 1033 ]
When privately held JAB Holdings Company, owners of Keurig Green Mountain since
2016, purchased Dr Pepper Snapple they assumed 87% of the newly formed Keurig Dr Pepper
[ CITATION Fon18 \l 1033 ]. The net effect of this was removing stock out of public circulation,
which significantly affected the price; on the first day of trading, July 9th, 2018, the stock prices
plummeted from $122 per share to approximately $24 per share. Since then, the average price for
the past 52 weeks is $29.03. The closing stock price for Keurig Dr Pepper on March 12, 2021
was 33.37.
When a private company obtains such a high percentage of a formerly 100% public
company, the merger can be awkward with regards to risk and challenges. One concern, from a
shareholder’s perspective, is whether they may, or not be, the prime interest of the new company.
Adding to shareholders concerns is that the merger may dilute a smaller brand because the
driving investor holdings include Krispy Kreme and Panera Bread. In an attempt to mitigate
Unit VIII Essay – Merger/Acquisition Evaluation
Columbia Southern University
MBA 6081 - Corporate Finance
Merger of Keurig Green Mountain and Dr Pepper Snapple Group
In July 2018, Keurig Dr Pepper announced the successful completion of the merger
between Keurig Green Mountain and Dr Pepper Snapple Group creating KDP, the seventh-
largest company in the U.S. food and beverage sector and third-largest beverage company in
North America. Keurig also markets the #1 single serve coffee brewing system in the U.S. and
Canada [ CITATION BEV18 \l 1033 ]. This case study will describe how the acquisition
affected financial statements, balance sheets, income statements, and cash flows. It will evaluate
KDPs financial policies after the merger including capital structures, debt, leverage, dividend
policies, and risk management. Lastly, this case study will conclude with the findings,
recommendations and rationale as to whether the acquisition was beneficial to both parties.
Background and Reason for Merger
Babe Ruth has been called the “greatest player of all time” by many sportscasters. His .
690 batting average was backed up by being the first player to hit 30, 40, 50 and then 60 homers
in a season [ CITATION Kur21 \l 1033 ]. Prior to his success, he was also known as the “King
of Strikeouts” and led the American League in strikeouts five times, accumulating 1,330 in his
career [ CITATION Kau20 \l 1033 ]. Keurig, has a similar strike-out story to tell. In June of
2016, they canceled their at-home soda machine called “The Keurig Kold”; it was the overpriced
machine nobody wanted. The device was designed to go after the home soda market occupied by
, SodaStream. Unfortunately, the Keurig version was substantially more expensive and could not
make sparkling water [CITATION Pla16 \l 1033 ].
Keurig Green Mountain knew their long-term success needed to include the carbonated
soft drink (CSD) market; the home soda machine was just a temporary setback. Much like Babe,
they had to refine their game and try again. Six months after the merger, the KDP portfolio had
strong market share growth as documented by reporting net sales growth of 3.2% in the 2019
annual report. [CITATION Keu21 \l 1033 ]
Risks during the KDP Merger and Mitigating Measures
One risk of completing a merger can be striking a balance between two distinct cultures
and service standards. [ CITATION All13 \l 1033 ] The leadership at JAB, Keurig Green
Mountain and Dr Pepper Snapple all had similar goals for their brands and knew what each
brought to the table. The Dr Pepper CEO, Larry Young, spent time with all organizations in the
merger and paid special attention to his employees. His active communication ensured that not a
single job was lost in the transition.[ CITATION Keu21 \l 1033 ]
When privately held JAB Holdings Company, owners of Keurig Green Mountain since
2016, purchased Dr Pepper Snapple they assumed 87% of the newly formed Keurig Dr Pepper
[ CITATION Fon18 \l 1033 ]. The net effect of this was removing stock out of public circulation,
which significantly affected the price; on the first day of trading, July 9th, 2018, the stock prices
plummeted from $122 per share to approximately $24 per share. Since then, the average price for
the past 52 weeks is $29.03. The closing stock price for Keurig Dr Pepper on March 12, 2021
was 33.37.
When a private company obtains such a high percentage of a formerly 100% public
company, the merger can be awkward with regards to risk and challenges. One concern, from a
shareholder’s perspective, is whether they may, or not be, the prime interest of the new company.
Adding to shareholders concerns is that the merger may dilute a smaller brand because the
driving investor holdings include Krispy Kreme and Panera Bread. In an attempt to mitigate
