Dr Pepper, Keurig to use bank debt, $9 billion equity sale for merger

By Devika Patel

Knoxville, Tenn., Jan. 29 – Dr Pepper Snapple Group, Inc. and Keurig Green Mountain, Inc. have debt commitments from J.P. Morgan Securities LLC, BofA Merrill Lynch and Goldman Sachs & Co. to help finance their planned merger.

The new company, to be called Keurig Dr Pepper, will also use a $9 billion equity investment from JAB Holding Co. to help fund the transaction.

“At close, we are targeting to have $16.6 billion of net debt,” Keurig chief financial officer Ozan Dokmecioglu said on the company’s conference call announcing the acquisition on Monday.

The company expects to pay this debt down quickly.

“We have the ability to generate strong cash flow, enabling rapid deleveraging,” Keurig chief executive officer Bob Gamgort said on the call.

“We are targeting to have a net debt EBITDA ratio below 3x within two to three years after closing,” Dokmecioglu said.

The company intends to keep its investment-grade rating.

“We are committed to maintaining an investment-grade rating,” Gamgort said.

Dr Pepper Snapple shareholders will receive $103.75 per share in a special cash dividend, retain 13% of the combined company and will keep their shares in Dr Pepper Snapple.

Upon closing, Keurig shareholders will hold 87% and Dr Pepper Snapple shareholders will hold 13% of the combined company.

The transaction is expected to close in the second calendar quarter of 2018.

Dr Pepper Snapple is a maker of non-alcoholic beverages and is based in Plano, Texas. Keurig is a Waterbury, Vt.-based personal beverage system company.

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