Keurig Green Mountain Inc. has agreed to be acquired by a JAB Holding Co.-led investor group for about $13.9 billion in cash, bringing a massive windfall to shareholders after a year of watching the stock get battered.
Keurig, a maker of single-serve coffee brewers, will be privately owned and independently operated following the buyout, according to a written statement released Monday. The purchase price of $92 a share is 78 percent higher than the company’s closing price on Friday. The premium is the largest in beverage-industry history for any deal above $5 billion, according to data compiled by Bloomberg.
The deal provides a bounty to investors after weak results and dimming prospects weighed on the stock this year. The company has suffered from waning sales of its K-Cup containers and lower prices on brewers. And a new cold brewer is rolling out more slowly than expected. The strong dollar also is hampering international sales.
JAB is a closely-held investment firm based in Luxembourg that manages the $16 billion fortune of Austria’s Reimann family. It’s run by a trio of seasoned consumer-industry executives who are plotting a challenge to global leader Nestle SA in the coffee industry. Its holdings outside of food include Jimmy Choo shoes and Coty fragrances.
“They have very deep pockets,” said Philip Terpolilli, a New York-based analyst at Wedbush Securities Inc.
Keurig shares had been down 61 percent this year through the end of last week. They jumped 74 percent, to $89.96 each, Monday morning after the buyout was announced.
Keurig was founded as Green Mountain Coffee Roasters Inc. as a small Vermont cafe in 1981 by Robert Stiller, an entrepreneur who got his start in business with the creation of EZ-Wider rolling papers in the 1970s.
Stiller, who is the largest outside investor in Indianapolis-based pizza business Noble Roman's Inc., was ousted as chairman of Green Mountain in 2012. He previously served as CEO from 1981 to 2007.
The board of Waterbury, Vermont-based Keurig unanimously approved the deal, which is expected to close during the first quarter of 2016.
“Keurig Green Mountain will operate as an independent entity to ensure it will further build on its coffee and technology strength,” Bart Becht, JAB’s chairman, said in the statement. The company’s management team, which is currently led by CEO Brian Kelley, will continue to run Keurig.
The plan to go private follows a dramatic rise and fall for Keurig, a pioneer of single-serve coffee brewers. The surging popularity of its device, which allows consumers to brew one cup of java at a time, sent sales and profit soaring in the past decade. In February 2014, Coca-Cola Co. agreed to buy a 10 percent stake in the company, betting that Keurig could repeat its success with a cold-beverage maker.
But that product, the Keurig Kold, is only being released on a limited basis this holiday season—a slower rollout than investors had anticipated. And the reaction to the device has been underwhelming, due partly to negative reviews, according to Stifel Financial Corp. That has raised concerns that it will become a niche product. At the same time, demand for its hot brewers and K-cups—the pods that go into the machines—has slowed. That’s left the company without a reliable growth engine.
Minority investors in the JAB group include Mondelez International Inc. and affiliates of BDT Capital Partners. Keurig consulted with Bank of America Corp. and Credit Suisse Group AG on the deal.
Coca-Cola, meanwhile, said in Monday’s statement that it supported the transaction.
“We have enjoyed a strong partnership with Keurig Green Mountain, and will continue our collaboration with JAB in order to capitalize on the growth opportunities in the single-serve, pod-based segment of the cold beverage industry,” Coca-Cola CEO Muhtar Kent said.