MILAN – Two private equity giants will help finance the mega deal in which US beverage giant Keurig Dr Pepper (KDP) will acquire Jde Peet’s, the world’s number one pure play in the coffee sector, and then split into two independent companies: Global Coffee Co. and Beverage Co. With estimated annual revenues of approximately $16 billion, Global Coffee Co. will, in turn, become the largest pure-play operator globally and will have the critical mass to challenge on equal terms what has been, until now, the undisputed leader in the global coffee market, namely Nestlé.
The original financing of the deal leaned heavily on bank debt, which would have pushed leverage toward five times EBITDA, threatening the company’s investment-grade standing, writes Reuters in a comment.
To mend concerns, Keurig found equity-like capital without equity-style dilution. The $7 billion commitment includes preferred shares and a minority stake in a coffee manufacturing joint venture.
The preferred carries a 4.75% dividend and converts to stock at a 37% premium to its closing price on October 24. The joint venture financing is expected to cost about 7.3% over ten years, but, with the blessing of ratings agencies, won’t be treated as debt, concludes Reuters.
On-paper leverage goes down to roughly four times EBITDA, within investment-grade range. Members of KDP’s Board of Directors and management team outlined the details of the plan yesterday morning at an Investor Day in New York City.
Here are the details of the financing explained in the press release issued by KDP
KDP updated its financing package related to the acquisition, now including two new strategic investment agreements totaling $7 billion, co-led by funds managed by affiliates of Apollo (NYSE: APO), and funds and accounts managed by KKR (NYSE: KKR). As a result, the Company now projects net leverage1 will be ~1.0x lower at 4.6x upon acquisition close, expected in the first half of 2026, with estimated adjusted EPS accretion of ~10% in the first full year.
Specifically, the Company announced today:
- Global Coffee Co. Pod Manufacturing JV: A binding commitment letter and term sheet for a $4 billion investment in a newly formed K-Cup® pod and other single-serve manufacturing joint venture (the “Pod Manufacturing JV”) co-led by Apollo and KKR, with participation from Goldman Sachs Alternatives. KDP will retain a controlling interest and operational control of the related assets. Over the next 10 years, the all-in cost of this capital is expected to be approximately 7.3 – 7.4%.
- Strategic Beverage Co. Investment: A definitive agreement for a $3 billion convertible preferred stock investment in the Company and the eventual Beverage Co., co-led by KKR and Apollo (the “Preferred Investment”). The key terms of this preferred stock include an initial conversion price of $37.25 per share, which represents a 41% premium to the Company’s 20-day VWAP ending on October 24, 2025, and a 6% premium to the Company’s last closing share price immediately prior to the announcement of the JDE Peet’s acquisition. The instrument features an initial preferred dividend rate of 4.75% per annum along with a participation right in common dividends paid on an as-converted basis, subject to netting mechanics such that common dividends reduce the preferred dividend obligation on a dollar-for-dollar basis.
These instruments reinforce KDP’s investment grade profile as a combined company, while creating long-term partnerships with leading investors with significant transactional experience across industries and the globe.
“Keurig Dr Pepper’s separation plan represents a pivotal moment for the Company, and we are proud to support this next phase through a comprehensive capital solution that brings together the best of Apollo’s ecosystem across our High Grade Capital Solutions and Hybrid franchises, in partnership with KKR,” said Apollo Partners Jamshid Ehsani and Matt Nord. “Our investments reflect deep conviction in both Global Coffee Co. and Beverage Co., and knowing each will benefit from strong leadership, focused operating models and optimized capital structures to drive long-term value creation as leaders in their respective categories.”
“We’re proud to support Keurig Dr Pepper’s leadership team as it continues to execute on a clear strategy for long-term growth and value creation across both its refreshment beverage and coffee businesses,” said KKR Partners Brian Dillard, Co-Chief Investment Officer for Global Atlantic, and Jennifer Box, Co-Head of KKR’s Strategic Investments Group. “KDP is a high-quality, blue-chip company, and we’re pleased to provide a partnership capital solution to support the ongoing success of its two leading businesses.”
The agreements are subject to customary closing conditions for agreements of this type.
The Company also announced intended capital structures for Beverage Co. and Global Coffee Co. upon separation. The Company remains committed to an Investment Grade profile for each independent entity, with targeted net leverage ratios at separation set at approximately 3.5 – 4.0x and 3.75 – 4.25x, respectively. KDP is evaluating further options to accelerate deleveraging and achieve these targets, including potential non-core asset sales and other cost-efficient strategic capital investments.
In connection with the financing transactions, the Company plans to nominate Brian Driscoll for election to its Board of Directors at the Company’s next annual meeting. Driscoll has more than 40 years of experience in the consumer-packaged goods industry. He is currently chairman of Acosta Group, chairman of The Arnott’s Group and a board member of Gibson.
Leadership & Integration Updates
The Company plans to be operationally ready to separate into two independent entities by the end of 2026 based on the achievement of key milestones, including the naming of best-in-class leadership teams and independent Boards of Directors for both Global Coffee Co. and Beverage Co. As previously announced, Tim Cofer will continue to serve as KDP’s CEO until the intended separation is completed and will then become CEO of Beverage Co. The KDP Board of Directors has initiated an internal and external search for the future CEO of Global Coffee Co.; Sudhanshu Priyadarshi will no longer assume this future role, as had been previously announced. Priyadarshi continues to serve as KDP’s Chief Financial Officer and President, International.
Last month, Roger Johnson was appointed Chief Transformation and Supply Chain Officer. Johnson joined KDP in 2016 and has held several leadership positions across the supply chain and R&D organizations, including as Chief Product Officer for the Keurig brand and most recently as Chief Supply Chain Officer. Key transformation objectives that Johnson is overseeing include establishing optimal operating models, executing a seamless integration, driving cost synergy capture and offsets to any separation-related dis-synergies, and setting up for a successful separation.
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