Keurig, the maker of single-cup coffee machines, has drawn its final card. Last Monday, the company has agreed to be sold to a private equity firm for a whopping $14 billion.
As reported by Daily Mail UK, Keurig which is a household name among coffee lovers has agreed to sell itself for almost $14 billion to an investment group led by JAB Holding Co.
According to the report, there isn't much difference with the taking over. JAB Holding states that Keurig will operate independently. The headquarters for Keurig will still be in Waterbury, Vermont.
The deal is just in time to save Keurig from declining sales of its machines and K-cups, the coffee-filled pods used in Keurig's machines. Although sales of K-cups, which accounts for more than 80 percent of Keurig's revenue, increased 1 percent to $3.6 billion in the year ending September, the sales of its machines dropped 23 percent to $632.6 million in the same period.
More so, Keurig's stocks have also decreased, dropping almost to 61 percent since the start of the year. In fact, its stock was the seventh among the worst performing stock on the "Standard & Poor's 500 Index For the Year" according to Mashable.
However, JAB Holding seems to see something of value in Keurig. The private investment firm has offered $92 for each share of Keurig. That is 78 percent premium from the stock's closing price of $51.70 last Friday. In effect, Keurig Green Mountain Inc. has increased its share value almost 72 percent, closing at $88.89 on Monday.
With the new take over, Keurig will help improve JAB Holding's strong coffee business. The Luxembourg-based company has a controlling stake in Jacobs Douwe Egberts, the mother company of Gevalia, Tassimo and many other brands. More so, it also has stakes in Peet's Coffee & Tea, and Caribou Coffee. The two companies are said to have prepared deals to make coffee pods for Keurig machines. JAB Holding will buy Keurig with minority investors that are likewise shareholders of Jacob Douwe Egberts.
According to analysts, the deal could get JAB Holding almost at par with Nestle. It might also plan to sell the Keurig brewing machines internationally. Aside from coffee, JAB Holding has stakes in Coty, maker of beauty products and Jimmy Choo, a high-end shoe maker.
Meanwhile, Keurig has also tried expanding its business beyond coffee. It recently launched Keurig Kold in September. It is a $300 machine that makes single glasses of Coca-cola and other sodas. Coca-cola is the largest shareholder with 17.4 stakes. According to Coca-cola, it supports the sale as it valued Coca-Cola's stake at around $2.4 billion last Monday.
The deal is expected to be finalized first quarter of 2016.
