Keurig to be acquired by investment firm for $13.9B

Maker of single-serve coffee pods to go private, run independently

Keurig Green Mountain Inc. will be acquired by a JAB Holding Co.-led investor group for about $13.9 billion (U.S.) 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 statement Monday.

The purchase price of $92 a share is 78 per cent 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 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 is also hampering international sales.

JAB is a closely held investment firm based in Luxembourg that manages the $16-billion fortune of Austria’s Riemann family. Its holdings outside 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 per cent this year through last week.

The board of Waterbury, Vt.-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 chief executive officer Brian Kelley, will continue to run Keurig.

The plan to go private follows a dramatic rise and fall for Keurig. The popularity of its device sent sales and profit soaring in the past decade.

In February 2014, Coca-Cola Co. agreed to buy a10-per-cent 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, 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.

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.