Keurig is being taken private in a $14 billion deal that will create a global coffee giant. Bobbi Rebell reports.
Keurig stock jolted higher by news of a takeover with a whopping 78 percent premium. Shares of the K-Cup maker shot higher on Monday after an investor group led by Germany's deep pocketed JAB Holding company announced plans to buy it for close to $14 billion or $92 a share. Analysts say the strategic acquisition was worth so much because it will make JAB dominant in the $6.1 billion North American single-serve coffee market, and make it a stronger rival to global leader Nestle. They also point out that based on EBITDA multiples, it was 13 times, which is reasonable for the consumer industry, given category growth rates. Earlier this year, the private equity company combined its D.E. Master Blenders 1753 business with the coffee business of Mondelez International to form the world's largest pure-play coffee company. JAB also owns Caribou Coffee and Peet's Coffee and Tea. Keurig is the leader in North America with a 61 percent market share. But its sales have been falling as competition heats up. Its latest brewers have not sold well. And that's not all, says Technomic's David Henkes SOUNDBITE: DAVE HENKES ADVISORY GROUP SENIOR PRINCIPAL, TECHNOMIC (ENGLISH) SAYING: "I think increasingly there is an environmental issue. There is also a cost issue, as these things are sometimes sixty cents to over a dollar per serving. It's really caused some issues in today's economy." The JAB deal opens up more global opportunities in regions like Asia, South America and Africa, where premium coffee is a strong seller, according to Henkes. The deal is also a big pay day for Coca Cola. The company is Keurig's biggest single shareholder, and it will get cash for its more than 17 percent stake.