Is KDP’s JDE Peet’s Acquisition a Masterstroke or a Risky Gamble?

TradingKey - On Monday, August 25, U.S. beverage giant Keurig Dr Pepper (KDP) and JDE Peet’s, the parent company of Peet’s Coffee, announced a definitive agreement for KDP to acquire JDE Peet’s in an all-cash transaction valued at €15.7 billion. While KDP aims to create the world’s largest pure coffee company, its debt-financed approach has triggered a downgrade warning from S&P Global Ratings.

According to the joint announcement, Keurig Dr Pepper will pay €31.85 per share in cash to JDE Peet’s shareholders, resulting in a total equity value of €15.7 billion (approximately $18.4 billion), a 20% premium over JDE Peet’s closing price on August 22. The deal is expected to close in the first half of 2026.

Buyer Keurig Dr Pepper currently owns, licenses, or partners on over 125 brands, including 7UP, Keurig, Dr Pepper, and Schweppes, spanning carbonated soft drinks, coffee, juice, and tea. KDP CEO Tim Cofer said:

“We are seizing an exceptional opportunity to create a global coffee giant.”

KDP stated it plans to split into two independent, U.S.-listed companies following the acquisition:

• Beverage Co.: Focused on the North American beverage market
• Global Coffee Co.: A pure-play coffee company

For Keurig Dr Pepper, this acquisition of Peet’s Coffee’s parent company will further strengthen its position in the coffee market and expand its global product portfolio. The standalone coffee company is expected to generate $16 billion in annual net sales, with $400 million in cost synergies within three years, positioning it as the world’s largest pure coffee enterprise.

According to KDP, the global coffee market is worth $400 billion. Global Coffee Co. will rank first among pure coffee companies, and second overall — behind only Nestlé — if the scope is expanded to include the broader “at-home coffee” category, far ahead of Starbucks in third place.

While the outlook appears promising, the path to achieving this vision is far from smooth. After the announcement, Keurig Dr Pepper’s stock plunged 11.48% to $31.10, its largest single-day drop since March 2020. Deutsche Bank cut its price target on KDP from $40 to $38.

S&P Global Ratings stated that because Keurig Dr Pepper plans to take on significant debt to finance the deal, it is considering downgrading KDP’s credit rating from BBB to BBB-, the lowest tier of investment-grade.

KDP said it will finance the acquisition through a €16.2 billion ($19 billion) bridge loan from Morgan Stanley and MUFG, with plans to refinance the debt later.

As of Q2, KDP’s total debt stood at $17.7 billion. If the company’s credit rating is downgraded, its borrowing costs will rise further.