Coca-Cola Co. will become Keurig Green Mountain Inc.’s largest shareholder after raising its stake to 16%, doubling down on the maker of Keurig coffee brewers at a time when consumers are increasingly shunning sugary sodas.
Keurig jumped 7.6% to $119.07 after Coca-Cola announced the plan in a filing today. The soft-drink company will own about 26 million shares within nine months after it exercises an option to add additional stock. It had bought an initial stake of 10% in February.
The investment fits into Coca-Cola’s strategy of taking equity stakes in promising new brands and technologies as healthier habits hits its main revenue growth. The companies are working together on the Keurig Cold single-cup beverage system that will be sold in Keurig’s fiscal 2015, starting later this year. The coffee maker will also produce and sell Coca-Cola-branded pods to go with the machine.
The “purchases demonstrate our continued belief that Keurig Green Mountain has substantial growth potential,” Atlanta-based Coca-Cola said in an e-mailed statement.
Shares of Waterbury, Vermont-based Keurig have jumped 47% since Feb. 5, the day Coca-Cola announced it was the buying the stake. Coca-Cola’s stock advanced 0.7% to $41.11 today.
SodaStream Competition
Under today’s agreement, Coca-Cola owns about 19.5 million shares and has the right to buy as much as 6.5 million more. The company signed a pact with Credit Suisse Group AG to purchase the balance of the stake by Feb. 13, 2015. The bank will set the price, determined by timing and an agreed-upon formula, according to the filing.
The partnership between Coca-Cola and Keurig will ratchet up competition for SodaStream International Ltd., a Lod, Israel-based company that makes home carbonation appliances and soft-drink syrups.
In February, Coca-Cola bought 16.7 million newly issued shares in Keurig for about $1.25 billion and said it had the option to raise the stake to as much as 16% during the first 36 months. Amanda Rosseter, a spokeswoman for Coca-Cola, declined to elaborate on the timing of the agreement beyond the filing.
Coca-Cola previously took equity stakes in Zico Coconut Water and Honest Tea, and helped incubate them. Coca-Cola eventually acquired all of Zico and Honest.
Coca-Cola’s investment in Keurig could be seen as a precursor to an eventual acquisition, though not right away, Ali Dibadj, a New York-based analyst at Sanford C. Bernstein & Co., said last month.
Keurig, which changed its name from Green Mountain Coffee Roasters Inc. in March, has been speculated as a takeover candidate for at least three years, in part because of its rapid growth.
Bloomberg
