WASHINGTON: US soft drinks giant Keurig Dr Pepper is set to create a global coffee giant to rival market leader Nestle with an USD 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 percent 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 US-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 US 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 percent 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 US President Donald Trump’s decision to impose 50 percent 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 USD 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.—Reuters