By Anuja Bharat Mistry and Jessica DiNapoli (Reuters) -Keurig Dr Pepper lifted its forecast for annual sales on Monday and said it had raised $7 billion from private equity firms to finance its purchase of Dutch coffee giant JDE Peet’s, allaying investor fears about mounting debt. Shares of the beverage maker were up 7% late […]
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Keurig Dr Pepper lifts annual sales forecast, raises $7 billion to fund JDE Peet’s deal
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By Anuja Bharat Mistry and Jessica DiNapoli
(Reuters) -Keurig Dr Pepper lifted its forecast for annual sales on Monday and said it had raised $7 billion from private equity firms to finance its purchase of Dutch coffee giant JDE Peet’s, allaying investor fears about mounting debt.
Shares of the beverage maker were up 7% late morning following the upbeat forecast and investment by private equity firms KKR and Apollo Global.
Keurig had announced the acquisition of JDE Peet’s for about $18 billion in August, along with plans to split the merged entity’s coffee operations and other beverage businesses, including Dr Pepper sodas, into two publicly traded companies.
Of the $7 billion investment, $4 billion will go into a new K-Cup pod and single-serve manufacturing joint venture that it will retain control of, Keurig said.
The remaining $3 billion will fund an investment in convertible preferred stock in Keurig, and eventually the beverage business.
INVESTMENT EASES FEARS OF MOUNTING DEBT
Investors have raised concerns over the deal as it comes amid record high prices for global coffee, driven by droughts in top producers Brazil and Vietnam and U.S. President Donald Trump’s erratic tariff policies. The company’s gross margins have also been squeezed by inflation.
Credit ratings agency Moody’s warned that the financial leverage of the combined Keurig and JDE Peet’s would materially increase.
“We think this… will help ease investor concerns surrounding the purchase and KDP’s plan,” CFRA Research analyst Garrett Nelson said.
With the new $7 billion investment, net leverage is expected to fall to 4.6 times adjusted profits, the company said.
KDP said on Monday it plans to keep investment grade credit ratings for both the beverages company and the coffee company.
The soft drinks maker is looking for other ways to cut debt such as selling assets and additional investments. It is also evaluating a partial public offering of the beverage company, said Jane Gelfand, senior vice president of strategic finance and capital markets at the company.
Shares of the company have fallen about 23% since the deal announcement and earlier this month activist investor Starboard Value built a stake in Keurig after the acquisition was disliked by investors, Reuters reported.
“Since the (deal) announcement, we have also carefully considered shareholder feedback and are responding with decisive actions,” Keurig Dr Pepper CEO Tim Cofer said. Keurig will be “much better positioned” as a larger company to deal with tariffs and volatile swings in commodities like coffee, he added.
SEARCH FOR COFFEE BUSINESS CEO
Keurig’s board has also started a search for the future CEO of the coffee business as CFO Sudhanshu Priyadarshi will no longer assume this future role, the company said.
The company now expects 2025 full-year net sales to grow in a high-single-digit, up from its earlier mid-single-digit range.
Third-quarter sales of $4.31 billion beat analysts’ estimates of $4.15 billion, according to data compiled by LSEG.
(Reporting by Anuja Bharat Mistry in Bengaluru and Jessica DiNapoli in New York; Editing by Shailesh Kuber and Leroy Leo)