Keurig Dr Pepper brews coffee challenge to Nestle with $18 billion JDE Peet's takeover

By Mateusz Rabiega and Juveria Tabassum

(Reuters) -U.S. soft drinks giant Keurig Dr Pepper is set to create a global coffee giant to rival market leader Nestle with an $18 billion takeover of JDE Peet's, Europe's largest acquisition in more than two years.

The deal, announced on Monday and offering a 20% premium to JDE Peet's closing market price on Friday, proposes splitting the merged entity's coffee operations and other beverage businesses into two separate publicly U.S.-listed companies, as the Dutch company would be delisted from the Amsterdam stock exchange.

The transaction, which comes as the global trade war intensifies corporate action in the consumer goods sector, aims to create $400 million in annual cost savings, allowing the new entities to better fare against rising U.S. tariffs against coffee-producing nations and other trade rivals.

"The new Coffee entity will be somewhat similar in size to the coffee business of Nestle... The two would each have a market share of around 20% in the global CPG (consumer packaged goods) coffee market" ING analyst Maxime Stranart told Reuters.

The deal comes amid record high prices for global coffee, driven by droughts in top producers Brazil and Vietnam and following U.S. President Donald Trump's decision to impose 50% duties on beans imported from Brazil.

Keurig Dr Pepper's North American footprint will complement JDE Peet's European presence, while offering a springboard to grow in emerging markets as coffee consumption there rises. But avoiding tariffs into the world's biggest consumer market will be hard as most of North America is too cold to grow coffee.

"Rolling the two coffee businesses together makes sense, reducing the European-centric and commoditised nature of most of JDE Peet’s business, and giving Keurig international exposure," said analyst Jon Cox of Kepler Cheuvreux.

POST-CLOSE SEPARATION

The transaction announced on Monday would partly reverse a 2018 merger that created Keurig Dr Pepper by combining Keurig Green Mountain and Dr Pepper Snapple, allowing investors to focus a single segment rather than a bundle of diverse products.

The new entities, called Beverage Co and Global Coffee Co, will be led by Keurig's CEO Cofer and CFO Sudhanshu Priyadarshi, respectively.

Keurig said that Global Coffee Co, with around $16 billion in combined annual net sales, will be well positioned to profit from the world's $400 billion coffee market, while Beverage Co, with more than $11 billion in yearly net sales, will focus on North America's $300 billion refreshment beverage market.

Shares in JDE Peet's surged 17.5%, marking their strongest day on record, while U.S.-listed shares of Keurig Dr Pepper were down about 7% as of 1625 GMT.

JDE Peet's, with brands including Jacobs, L'Or, Tassimo and Douwe Egberts, was valued at 12.76 billion euros at Friday's market close, while Keurig's worth stood at around $48 billion, according to LSEG data.

Its shares have risen nearly 10% this year on strong beverage sales, while the Dutch coffee maker's almost doubled, supported by stable revenues and a focus shift towards shareholders' remuneration.

JDE Peet's is majority owned by a unit of the billionaire German Reimann family's investment firm JAB Holding, which has committed to tendering its 68% controlling stake in the Dutch coffee company.

JAB also owns a 4.4% stake in KDP and will hold nearly 5% in both follow-up companies after the acquisition and subsequent spin-off.

The deal is expected to close by the first half of 2026, with the split expected to happen by the end of that year.

($1 = 0.8544 euros)

(Reporting by Mateusz Rabiega in Gdansk and Juveria Tabassum and Angela Christy in Bengaluru; Additional reporting by Mathieu Rosemain in Paris and Christoph Steitz in Frankfurt; Editing by Stephen Coates, Kirsten Donovan, Lisa Jucca, Louise Heavens and Jan Harvey)