Keurig Dr Pepper is turning to two private equity firms to ease shareholder concerns that its coffee megamerger will leave the company on shaky ground.
Apollo and KKR will invest $7 billion across the two companies resulting from Keurig’s merger with JDE Peet’s, which will combine and split along hot-and-cold beverage lines. The two firms are investing $4 billion into the coffee business, which includes Keurig K-cups, and $3 billion into the beverage business, which covers drinks like 7-Up.
The merger with coffee-and-tea giant JDE would saddle Keurig with $38 billion of debt, and Keurig shares fell as much as 28% in the weeks after the deal was announced in August, prompting activist investor Starboard Value to build a stake.
Keurig’s discussions with Apollo, KKR, and other investment firms began late this summer, before news of Starboard’s stake first broke, according to people familiar with the matter. The people described the decision to bring in outside money less as a reaction to a potentially noisy activist than a response to the same investor concerns that drew Starboard — namely, that the company would end up overleveraged and unable to meet its interest payments while investing in growth.
Still, KKR has advertised itself — literally — as a savior for companies under activist pressure. “If you’re a public company under attack, give us a call!” KKR executive Pete Stavros said in May, after the firm took a 12% stake in a dental supplier with an activist in its stock.